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Try not to laugh too hard but I'm still using an original 8 year old Apple AirPort, even though I have newer Macs in the house capable of using the newer airports. Would it make sense to buy a Time Capsule to replace my old AirPort and to use for wireless back-up? I have an old iBook and TiBook with old airport cards, would those still work with a Time Capsule?
Yes, a Time Capsule would work fine and be fine with your older machines. Obviously, wireless backups or using it as NAS would be slower because the machines don't have 802.11n, but it would still work.
Network Attached Storage. Basically it's a drive found on a network device, rather than connected to a particular computer, which computers can use to backup to.
"The natural progress of things is for liberty to yield and government to gain ground." TJ
You'll want to keep your old Airport around in bridge mode to connect your legacy systems with deprecated wifi standards to so they don't impact the performance of your modern clients.