Use a Cat-5e cable or Cat 6, as the Time Capsule ports are gig Ethernet.

I setup my own linux TC based on a network-attached drive. It worked, but Time Machine would not always reliably find the drive and start the backup. I ended up buying a TC, and I haven't had any problems. A lot of the criticisms I've read are based on initial backup time, and that's easily solved.

Apple recently cut the price of a 1TB TC in half. Were you aware of this?

My biggest gripe with the TC is lack of compliance with RFC 1918. For the 10.0.0.0 network, you can't have NAT clients in anything that doens't start 10.0.X.Y. All of my printers and media devices were in 10.30.50.X, and all had to be renumbered, along with the clients that pointed to them. It was a royal pain.