was curious as to whether TC is able to back up USB connected drives as well as the macbook.
Not sure what you are asking.
Time Machine can back up the Mac and a USB or FireWire drive attached directly to the Mac to the Time Capsule.
Time Machine cannot backup a drive attached to the USB port on the Time Capsule. You would need Carbon Copy Cloner or SuperDuper for that.
Thanks very much for all the responses and I apologize if I hadn't phrased my questions clearly, but yes I am trying to backup FROM USB drives connected directly to the Time Capsule (or Airport Extreme) which it looks like Time Machine can't do.
I am not familair with Carbon Copy Cloner or SuperDuper - could I then use Time Machine for my Macbook hard drive and SuperDuper for backing up USB drive(s) connected to the router? I would probably set up a NAS as the destination or another USB drive...