OS X Yosemite - iPhoto v.9.6, library needs upgrade

Question

Hi there,
My apologies if this Q has been answered before - I've failed to find a response in the relevant discussions:
I installed OS X Yosemite some months ago. Since then, every time I wish to open my iPhoto v.9.6, the following window pops-up:
"The photo library needs to be upgraded to work with this version of iPhoto"
"Your photo library will not be readable by previous versions of iPhoto after the upgrade. The upgrade process for very large libraries may take an hour or more to complete." "Quit" "Upgrade".
Every time I proceed "Upgrade" the computer takes 10 mins. to let me know that it's "examining my library", after 5 mins. iPhoto crashes and closes.
I've tried to use "option" + "command" and then click on iPhoto but even when I do so and I select any of the options available, the aforementioned window still shows up.
Note: I save my photos in my time capsule not in my imac.
Thanks in advance for any guidance you may be able to provide.
Regards, F

Answer 1

Thx Leonie,
Surprisingly, I just went to the crash reporter and there were no reports re: the iPhoto issue. This is the only report I found, which I not sure is related to the iPhoto issue:
<?xml version="1.0" encoding="UTF-8"?>
<!DOCTYPE plist PUBLIC "-//Apple//DTD PLIST 1.0//EN" "http://www.apple.com/DTDs/PropertyList-1.0.dtd">
<plist version="1.0">
<dict>
  <key>OSBuild</key>
  <string>10.10.2:14C109</string>
  <key>appRecords</key>
  <array>
  <array>
  <string>AppRecord</string>
  <string>DiskImageMounter</string>
  <string>com.apple.DiskImageMounter</string>
  <string>396</string>
  <string>10.10.1</string>
  <integer>7</integer>
  <integer>0</integer>
  <integer>1</integer>
  <integer>0</integer>
  <integer>0</integer>
  <integer>0</integer>
  <integer>0</integer>
  <integer>0</integer>
  </array>
  <array>
  <string>AppRecord</string>
  <string>com.apple.ncplugin.weather</string>
  <string>com.apple.ncplugin.weather</string>
  <string>32.3</string>
  <string>1.0</string>
As for the TimeCapsule indeed, I use it as an extended drive but I'm surprised it would be considered a FAT-32 formatted drive as this is an Apple device.
I asked the apple reps if I could use the TimeCapsule for such purpose and no one raised a concern. It's also surprising that I didn't have an issue with this prior to the upgrade to OS X Yosemite.
Having said the above, thank you for your help - if the TimeCapsule is indeed the issue, perhaps I can solve the issue by transferring the iphoto library to an OS extended hard drive.