How to erase a dead Time Machine: Necessary? If so, how?

Are Time Capsule Time Machine backups encrypted by default, and if not, how can I erase the Time Capsule if the power supply is dead?
Details:
I bought one of the early Time Capsules (1 GB) two years ago, and it finally died. It just wouldn't light up or start. Presumably, this is due to the well-known early power supply issues, and presumably the hard disk is still in good shape.
I brought it to my local Apple store, and they were great. Although I do not have Apple Care, due to the design flaw with these very early units, they said they will replace it with a refurbished unit for free. (Nice!) It will take a few days. Meanwhile, I have the old dead drive. It occurs to me that I have my whole life on that hard drive, and if someone were to be able to resurrect it and restore the backup to an empty Mac, they would have much information that they shouldn't have.
Yes, I could drill through the case and into the drive, but I don't think Apple would then accept it as a swap. Yes, I could take a big magnet to it, but how do I know it's big enough? (I've been to some sites that claim hard drives are very hard to erase because they case protects them magnetically.)
Someone I spoke with today reminded me that you need an overall disk password to be able to get to the data, and that is true when the HD is working right and you are logging on to the Time Capsule. But does that mean the data is (even lightly) encrypted, or is that just time Time Capsule firmware arbitrating access such that any barrier would go away if you could mount the disk physically?
Any suggestions would be welcome.
Thanks.

Thanks. That's what I'm in the process of doing. I already opened the case, and I'm going to take the drive to work tomorrow where my IT department has an eSATA cable that I can use.
I hesitated in doing this because I felt Apple would consider the case breached and say they couldn't take the unit in swap. However, I spoke with the Genius Administrator at my local Apple store today, and she told me that it is OK if I do that. She was very understanding that I would want to erase the drive before returning it. She just told me to make sure I return the unit as close to original as possible. I used a hair dryer to warm the bottom before peeling it off, and everything will go back together pretty perfectly.
So, this is fully acceptable to me.
Thanks.

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