Why won't itunes recognize/play from my library on time capsule

Question

I have a macbook air running mountain lion 10.8.2
1 TB Time Capsule
Itunes 11.0.1
Iphoto 10.8.2
Its been my goal for a long time to get all of my music and all of my photos onto the time capsule and be able to pull them up via itunes and iphoto directly from the hard drive.
) the new itunes version updated and erased all of my playlists and most of my music/movies/apps etc.         such a nightmare
) so since everything was defunct anyway, I move my itunes file over to the time capsule. Changed the reference folder in iTunes preferences
Keep iTunes Media folder organized is checked
Copy files to itunes media folder when adding to library is checked
Then I went to File>Library>organize library
Then restarted itunes
) Itunes doesn’t pull up all of my movies and media still
) If I click on a song from the itunes folder on the time capsule – it plays and adds to the itunes screen.  if I drag the whole folder onto the itunes screen, it seems to be busy copying etc. but in the end nothing changes.
) If I click on an .m4v file, it doesn’t open with itunes and doesn’t give that as an option. If you search for itunes app to open it, you have to search through folders to find it.   Even after you get it to open in itunes, I don’t think the movie is stay

Answer 1

You can use the Time Capsule for storage but not as a media Server
The Time Capsule / Airport with external drive can act as media STORAGE, but neither will run as a media SERVER. You will need at least one Mac running iTunes, with sharing turned on, and/or a media extender program like Null River's Media Link which will create a standard uPnP front-end that a PS3, Xbox or similar can poll.
A Mac Mini is often used as a media server... but might not be as cost-effective as other solutions...