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You can use your Time Capsule to store files or to make backups, and I recommend you to use it to make backups with Time Machine. Open System Preferences > Time Machine > Select Disk, and select the Time Capsule, so Time Machine will start making backups onto your Time Capsule and your data will be safe. When the Time Capsule gets full, Time Machine will delete old backups.
If you wanted to use the Time Capsule to store files from the computer, I recommend you to get another external drive and use it to store these files. It's much better and you won't waste a Time Capsule with an enormous hard disk
Have you read about how to use Time Machine? Nothing could be easier - you connect the Time Capsule and start Tiim Machine running - when you need to recover files you launch Time Machine and go back in time to the time you wnat them from, select them and restore them using Time Machine - trivial and fool proof as long as you do not get cute and change how it works - people who only backup once a day or even less using Time Machine will have problems - you need to run it with its default settings
and you need to figure out what you want - in one place you say you want a backup of your system including your photos which you must have - with no backup you will lose everything sooner or later - and Time Machine is a good choice for backups
Then later you say that you do not want a backup but an archive so you can delete itesm from your computer and retreive them later from your external hard drive - that is not a backup and if you do not have a backup of everything (your system and yoru archive) then you will lose your files and photos someday
So exactly what is it that you want?
Well the thing is my 500GB macbook is full. I bought the time machine to put everything onto there because my iphone is also full and I cannot take any vids or pictures. so i want to empty my macobok so I can empty my iphone onto my macbook. I bought a 2TB capsule so I figure I wouldnt be in danger or anything getting deleted off? I believe when I first got it i turned on time machine and connected it to the time capsule but I just went to mende1s steps on setting up the capsule and it hadnt saved any of the information I did, it said it was going to do a backup in 103 seconds or so with no previous backups...I thought I hjad already started this backup process. Im so confused
Again you are talking about two different things - Time Machine =makes backups not archives and if yhou delete things from your system sooner or later they will also disappear form the backup -- I think you are looking for an archive - but you still must have a backup in addition to your archive
So your best bet is to start time Machine and get yourbackup going and pruchase another external hard drive and
Moving the iPhoto library is safe and simple - quit iPhoto and drag the iPhoto library intact as a single entity to the external drive - depress the option key and launch iPhoto using the "select library" option to point to the new location on the external drive - fully test it and then trash the old library on the internal drive (test one more time prior to emptying the trash)
And be sure that the External drive is formatted Mac OS extended (journaled) (iPhoto does not work with drives with other formats) and that it is always available prior to launching iPhoto
And backup soon and often - having your iPhoto library on an external drive is not a backup and if you are using Time Machine you need to check and be sure that TM is backing up your external drive
This will free up space on your MB drive and you will have a baup to protect your data and photos
You can even have a second iPhoto library on yoru MB and use iPhoto Library Manager - http://www.fatcatsoftware.com/iplm/ - to move photos between the one on your EHD and yoru MB