The 7.3.1 firmware update for Time Capsule and AirPort Extreme Base Station network gateways, released last week, adds two significant improvements, neither of them mentioned in Apple's release notes. You can now archive the internal drive in a Time Capsule appliance - copying its contents, including backup images of networked systems - to an externally connected USB drive at full USB speeds, without round-tripping the backup through a mounted AFP server. And, apparently, USB-connected drives on an AirPort Extreme Base Station are available for Time Machine backups in Mac OS X 10.5 Leopard.
The firmware update (labeled "Time Capsule and AirPort Base Station (802.11n) Firmware 7.3.1") has no real release notes, and the same is true for a matched update, Time Machine and AirPort Updates 1.0, released earlier in the day. The former updates three models of base station (Time Capsule and the two 802.11n models), while the latter updates Leopard. The notes mention bug fixes, driver fixes, and compatibility improvements without enumeration or description. One security improvement that affects just the AirPort Extreme Base Station with 802.11n (both models) is mentioned and detailed, having to do with maliciously crafted AFP packets.
The Archive option, found in the Disks tab of AirPort Utility 5.3.1 (available for download for Mac OS X 10.4 Tiger, Leopard, and Windows XP/Vista) should ameliorate a primary flaw in the Time Capsule conception: it has an internal drive that you could previously copy only over the network via AFP, which can be slow. This new option lets you archive the drive, copying its contents to a drive you connect via USB. The internal drive - like all networked Time Machine backup volumes - contains sparse disk images with the Time Machine backups of networked Leopard volumes; it can also hold other data, because Time Capsule shares the internal drive as an ordinary volume over AFP. These sparse images can be mounted like normal disk images, or used to restore systems via Time Machine, move data with Migration Assistant, or set up a system with the Leopard installation DVD.
The other improvement is a little sketchier. Before Leopard shipped, Apple listed a Time Machine feature that would let you back up Leopard systems to a USB drive connected to an 802.11n AirPort Extreme Base Station. When Leopard appeared, that feature was missing; no explanation has ever been forthcoming from Apple as to why (see "Time Capsule and Its Associated Rage Factor," 2008-01-17). Networked backups using Time Machine work only with AFP volumes that are shared by Leopard clients or Leopard Server. Time Capsule's externally connected USB drives are also valid target volumes, which added insult to injury.
Without any fanfare, Apple appears to have added AirPort Extreme external drive backups in this firmware release. If you open the Time Machine preference pane in System Preferences, you can click Change Disk and see all networked AFP volumes and Time Capsule volumes. If you first mount an AFP volume from an AirPort Extreme gateway, that volume is now a valid selection for Time Machine; this wasn't the case before this update.
It's unclear if this was intentional or an error. If intentional, it's odd that you can't see the base station just as Time Capsule shows up; if unintentional, it's an odd slip for a contentious issue with base station buyers.