Expanding storage capacity for two Macs with external HD?

I have a G5 and a MacBook. I want a Time Capsule to help me be better about backing upp my MacBook. I'm trying to decide which size to buy. Money is an issue. I have a 1 TB Western Digital My Book Studio edition which I currently use as a backup disk. I use TM, and SuperDuper! for bootable backups (even though the MBSE doesn't do bootable on pre-Intel Macs, unfortunately).
I don't really understand the function of the USB connection on the TC, can someone explain that? Why is it there? What is it ment for? Will it work well to do this:
I've read discussions here and understand that it can't be used to extend the TCs storage size, a connected HD is instead treated as a separate disk. But I haven't found a thread that directly answers the question of if it is a viable solution (as for exemple a way of saving money if you already own a large HD) to use Time Machine to back up one computer with a wired connection to the the HD attached to the TC, and to use TM on another computer to back it up wirelessly to the TC itself.
I can see one obvious disadvantage to this is that if one disk fills up, backups for that computer can't continue over to the other. But other than that, is it possible to do this and is there any other disadvantage?
I've read many threads where people ask about backing up an external HD attached to a TC, but that's not what I'm interested in.
Sincerely

On each computer:
Open iTunes. Select Preferences from the iTunes menu and click on the Advanced icon in the toolbar. At the top you will see a box showing the path to your iTunes library. Click on the Change button, navigate to the location for the library on your external drive, select it and click on the Open button. Note this permanently changes the library's location on that computer. That means you cannot access your music unless the external drive is connected.
If you don't want a permanent change, then press the OPTION key and hold it down while you launch iTunes. iTunes will then prompt you to select the library you wish to open for that session.

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