I finally had to opt for erasing the whole Time Capsule by unplugging it, and using a paper clip to reset it in the back and then set it up again from scratch. I don't know other people's experiences with Time Capsules and Time Machine, but this is not the first time I have lost back ups due to some corruption with the software, so I find the whole system extremely unreliable for back ups and had opted for signing up to an online back up system (carbonite). While the majority of the time Apple delivers great products and software, once in a while they will seem to drop attention to a particular software and move on to the next adventure and its very frustrating. Right now, I'm having all sort of problems with Mountain Lion ranging from having computers over heating, to slowing down and multiple instances of getting stuck with the spinning wheel of frustration and have been waiting for Apple to address the problem (even sending them frequent feedback), but so far nothing has been done and I'm sure now their attention is on the iphone 5 so who knows when and if we will see a solution any time soon.
I hate to sound old, but part of me misses the years Apple was the underdog and seemed more connected with the community that supported it.