WiFi Time capsule

This sounds like you have another router that is providing your wireless network. Would that be correct?

If things are working the way that you want, do you want to be able to back up to the Time Capsule over your existing wireless network provided by your router.......or......do you want to configure the Time Capsule to also provide a wireless network, so you can back up over the Time Capsule wireless network?

Unless you have another Apple AirPort router providing your regular wireless network, the Time Capsule will not able to connect to the network using a wireless connection.......it must connect using Ethernet. If you don't want the Time Capsule to also provide another wireless network, then it will only take a few clicks to turn off the WiFi on the Time Capsule, so you can back up over your regular wireless network.

Best to start over again and set up the Time Capsule.

To do that, connect an Ethernet cable from one of the available Ethernet ports on your wireless router to the "O" (bottom) port on the Time Capsule

Power up the Time Capsule if it is not already on and let it run a minute

Hold in the reset button on the back of the Time Capsule for 7-8 seconds, then release

Allow a full minute for the Time Capsule to restart to a slow, blinking amber light status

On your Mac.......

Click on the WiFi menu at the top of the screen

Look for a listing of New AirPort Base Station

Click directly on AirPort Time Capsule

When you click on AirPort Time Capsule, that will start up the AirPort Utility setup "wizard". The wizard will take a few seconds to analyze the network settings and then display a screen that looks like the example below, except that you will see a Time Capsule pictured.

Network Name.......Type in a name for the Time Capsule wireless network. Keep it short and simple

Base Station Name......Type in a device name for the Time Capsule. Keep it short and simple

Password.....Type in a password

Verify......Type in the same password again to confirm

Click Next, and give the Time Capsule a minute to restart with the new settings

When you see the message of Setup Complete, click Done

Should be a green light on the Time Capsule at this point

Log back onto your normal router's WiFi network

Check to see if you can run a backup

Report on your progress

Assuming that things are working now, the next step will be to turn off the WiFi on the Time Capsule. Note that the Ethernet cable connection between your router and the Time Capsule must remain connected at all times.

My biggest worry is that it is showing with an 'internal disk error'

Unfortunately, that is a big worry, since this message does not normally appear unless the Time Capsule hard drive is starting to fail. I honestly doubt that erasing the hard drive......if that is even possible at this point.......will help, but it is worth a try as a last resort.

If you want to try erasing the Time Capsule disk......

Open AirPort Utility on your Mac

Click on the Time Capsule

Click Edit in the smaller window that appears

Click the Disks tab at the top of the next window

Click Erase Disk

Select the Quick Erase option if it is not already selected

Click Erase

The procedure......if it will run......will only take a few minutes. If the erase is successful, try to run another backup.

If the "disk error" message continues, I'm afraid that the Time Capsule hard drive has failed.

Go head and set up the Time Capsule to "create a new network".

Once this is done, then switch your Mac back over to your "normal" WiFi......not the Time Capsule WiFi network that you have created.

If all is well, and you don't need the Time Capsule WiFi network for guests or the kids, then you can use AirPort Utility to turn off the wireless function of the Time Capsule, so it will act like a wired hard drive connected to your modem/router.

AirPort Utility > Select the Time Capsule > Edit > Wireless Tab > Network Mode > Off > Update

You did not indicate whether you had any special type of requirements for a backup hard drive, but the least expensive, simplest, fastest, and most reliable way to back up would be to connect a USB hard drive directly to your Mac.

Were you also using the Time Capsule as a router, or do you have another WiFi router that is providing a network to which your devices connect?

In other words, do you need another router in addition to a device that can handle backups from your Mac(s)?

Then, it would make sense to look at a NAS (Network Attached Storage) product, which will connect to your router using an Ethernet cable connection, similar to the way that your Time Capsule connected to the network.

You will be able to back up over the WiFi to the NAS, or connect directly to the NAS from your Mac using an Ethernet cable connection if you wish.

Synology is a recommend NAS brand. More info here:

https://www.synology.com/en-us/support/nas_selector