Try this procedure.
Drive Partition and Format
1. Boot from your OS X Installer Disc. After the installer loads select your language and click on the Continue button. When the menu bar appears select Disk Utility from the Utilities menu.
If you are preparing an external or a non-startup drive, then open Disk Utility in your Utilities folder.
2. After DU loads select the hard drive (this is the entry with the mfgr.'s ID and size) from the left side list. Note the SMART status of the drive in DU's status area. If it does not say "Verified" then the drive is failing or has failed and will need replacing. SMART info will not be reported on external drives. Otherwise, click on the Partition tab in the DU main window.
3. Under the Volume Scheme heading set the number of partitions from the drop down menu to one. Click on the Options button, set the partition scheme to GUID then click on the OK button. Set the format type to Mac OS Extended (Journaled.) Click on the Partition button and wait until the process has completed.
4. Select the volume you just created (this is the sub-entry under the drive entry) from the left side list. Click on the Erase tab in the DU main window.
5. Set the format type to Mac OS Extended (Journaled.) Click on the Security button, check the button for Zero Data and click on OK to return to the Erase window.
6. Click on the Erase button. The format process can take up to several hours depending upon the drive size.
Steps 4-6 are optional but should be used on a drive that has never been formatted before, if the format type is not Mac OS Extended, if the partition scheme has been changed, or if a different operating system (not OS X) has been installed on the drive.
How do you have this drive connected? Is it internal or external? I'm sort of guessing the former give where you got it.
I've done this in the past with varying success:
With Disk Utility open select the volume entry below the disk entry (be sure you are not selecting your startup drive.) Click on the Unmount icon in the DU toolbar. If the drive unmounts then try the procedure again picking up at Step 3. You can do this when booted from your startup drive, btw.
If this does not work, then open the Terminal in your Utilities folder. At the prompt enter:
Press RETURN. You should see a listing in the window of the disks and volumes connected. Adjust the window size if need be. Locate the lines for this old Time Capsule drive.
#: TYPE NAME SIZE IDENTIFIER
0: GUID_partition_scheme *1.0 TB disk0
1: EFI 209.7 MB disk0s1
2: Apple_HFS Macintosh HD 356.8 GB disk0s2
3: Apple_Boot Recovery HD 650.0 MB disk0s3
4: Apple_HFS Mountain Lion Test 80.3 GB disk0s4
5: Apple_Boot Recovery HD 650.0 MB disk0s5
6: Apple_HFS Mountain Lion 431.7 GB disk0s6
7: Apple_Boot Recovery HD 650.0 MB disk0s7
Write down the disk Identifier of the Time Capsule disk, like disk1s2, for example. Now enter:
diskutil unmount force disk_identifier
Press RETURN. Substitute the actual disk identifier you wrote down for the parameter in italics above.