I believe that was the original plan, but when they found they couldn't control error-checking to the extent they needed for Time Machine, they changed the requirements to this:
Setting up Time Machine is as easy as connecting an external hard drive to your Mac via FireWire or USB, or by connecting to a Time Capsule. You can also use a secondary internal disk if your desktop Mac has one (that is, a disk that you don't start up from).
It does go on to state this, which seems contradictory:
If your backup disk is on a network, the network server must use Apple File Protocol (AFP) file sharing and both your computer and the networked backup disk should have Mac OS X 10.5.6 or later installed.
But, I think that just implies that it was a choice from the first blurb, and is on a network.