Hello ChrisCM,
Extend your wireless? Yes
Still use it as a TimeCapsule? I don't see why not.
Which time Capsule is it? 2011 or 2013?
If your happy with the wifi you have now, why would you need to extend it?
If it is the 2013 Time Capsule, then are you sure you don't want to use it as your main wifi in your house? I only ask as the new 2013 Time Capsule has A/C wifi which is new and super and even if the devices in your house only support b.g.n then they all will still get a much better reception from this new wifi.
I have recently set up my new Airport Extreme 2013 and my old devices surf the internet now at a much faster rate which I am very happy with.
What I did was deactivated the the wifi from my router and via LAN cable, connected it to the Airport Extrene 2013. By doing this, I have reduced the flow of interference from both wifi devices subjecting it only to the powerful Airport Extreme with it's new wifi capability. Granted my router is about 3 years old but it is running on the old wifi which is b.g.n and the new a/c really makes the difference. But like I also asked, which Time Capsule? because if it is the old flat one like the one I have then yes, I would use it to extend my wifi if need be. But if it's the new tall one, I would deactivate the old wifi, connect the apple time capsule to it via lan and then use that as my main wifi because of the 6 antennas in it.
I hope this helps,
regards,
Robin