Is it possible to use my Time Capsule as an iTunes Media Server?

I've bought a macbook air, which is awesome, but a bit lacking in space, it's already filling up.
At the same time I bought a 2TB time capsule. Although I think the back up features are great, I always had the intention that I'd be able to use the Time Capsule as a wireless, and even remotely accessible, personal cloud, to store some of my bigger files. Namely, my iTunes library and my iPhotos library.
I've been into the Apple Store, and the genius there told me it was a simple as copying the two libraries onto the TC, and then redirecting the apps to look at those libraries. Dead easy.
In theory, this creates a perfect system. I realise there might be a bit of lag retrieving stuff, especially if I'm trying to get a movie off the TC while I'm travelling. But if I've got half a day spare to download it, then it's great to have that option if I've forgotten to copy it to my Mac Book before I leave.
In practice, it doesn't work. Because the TC is being used to keep a back up as well, I can only copy the libraries into the Data folder. And I've read somewhere that this can confuse issues a little bit. Now when I try to navigate to the libraries, connection to the Time Capsule always fails.
I realise I could probably achieve this by plugging an external hardrive into the Time Capsule. But I've got two terabytes of space on the TC, it'll take forever to fill that up with just back ups. I don't feel I should have to buy another hardrive, when I've got a TB and a half of free space waiting to be used.
The only idea I can think of is if I partition the TC harddrive, keeping one half for the back ups, and one half for my media library.
Has anyone actually succedded in doing this? Any ideas or help anyone can offer, this is getting really frustrating, and if it doesn't work, I think I'll have to return the Time Capsule, or scrap the idea of backing up, and just use it as an iTunes server instead.
Thanks.

Hi Latitude Journey
Make sure you do the following if you are planning to load all your library on TC:
Step 1: make sure that you tell iTunes where your media folder is located, under preferences, advanced, chose the location of your media folder (assuming you are using iTunes 10+.
Step 2: Once you are done telling iTunes where your media folder is located (music, etc) make sure you go to users & groups under system preferences (assuming you are running Lion or Mountain Lion OSX) and choose login items, then click the + sign and locate your time capsule from the shared drive section in finder, just chose it (no specific folder) just any folder.
the reason why you should do this, is that if it happen that you restart your mac! iTunes will try to look for the drive that has your media/music that you set earlier in step 2: , and since TC is not an actual NAS drive, it is more like a shared drive, it will take few seconds for the hard drive on it to load, where iTunes will not be able to locate it before it is ready, and thus it will revert to the default location of the media folder which is under music/itunes/itunes media/, and eventually none of your songs will actually work since they are on the TC and not your mac.
doing what i told to do in step 2: will make sure that your TC hard drive is ready before your iTunes try to locate the media folder, where you will be able to play your library without any issues.
failing to do so, most probably you will face the problem where you try to play songs in iTunes and finding that they have exclamation mark next to them, which means that they are missing from the library.
my music library is all located on my Time Capsule, and iTunes runs on my Mac mini (with home sharing enabled), and my iTunes is set to lunch on start up under system preferences/users & groups/login items/.
My mac mini act as a server (don't worry about your mac going to sleep, it will wake up once you try to access your media from other devices) assuming that you have the option wake on LAN enabled under network in system preferences.
This is my setup.
- Mac mini mid 2011, running Mountain Lion and latest iTunes set to launch on startup in case of computer power on or restart so i don't have to worry about launching it manually.
- Time capsule 2 TB, used as network shared hard drive
- MacBook Pro early 2011 running Mountain Lion and latest iTunes
- 2 iPads
- iPhones 4s
- Apple TV 1 and Apple TV 2
all my devices having home sharing enabled under the same account.
i can access my music library from any of my devices easily and problem free.
hope this will help you and other users.
Many thanks

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