The library is working in its new location? You moved it by copying the whole iTunes folder and not by changing any preferences settings?
I haven't done anything with library sharing so I'm no expert, but you will probably want your setup so each person has their own library but you use a common source of media. One major issue is if you are using the library on your computer, nobody else will be able to use it because the library files can only be open by one iTunes application at a time. Some of this might be possible with Home Sharing, or you can simply keep a common pool of media and trust each other not to accidentally delete a file everybody else is using.
Another item of concern is putting this on the Time Capsule drive. Normally that is used for backup purposes and if you have you media on there too then you have no library backup. Yes, you can use Match but it isn't really a backup service. E.g., if you have media stored as lossless on the computer, match doesn't store it as lossless but in reduced quality. It also won't back up the other things in your library such as playlists.