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I have a 2TB Time Capsule (version 7.6.1) and I want to connect a USB disk formatted as HFS+ with encryption enabled (on MAC OS X Mountain Lion). When I connect it directly to my iMac, it asks for a password (if it's not already in the keychain) and then I can see it mounted. Is there a way to give the password when it's connected to the Time Capsule or it doesn't support encrypted disks at all?

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In case that Time Capsule doesn't support encrypted HFS+ volumes, you can decrypt the volume if the encryption is not critical for your data, without re-formatting the volume using the following command: diskutil cs revert disk1s2 (assuming that the encrypted volume is the second slice on disk1) you can use diskutil coreStorage list for status – Sof Nov 28 '12 at 9:25

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As far as I can tell from reading Apple documentation and other users' experience (I don't own a Time Capsule myself) you can't use encrypted HFS+ drives.

According to http://support.apple.com/kb/HT2426 Time Capsule only supports HFS+, HFS+ with journaling, FAT16 and FAT32, which would rule out encrypted HFS+:

The AirPort Extreme (802.11n) and Time Capsule support USB storage devices that are formatted as Mac OS Extended (HFS-plus), FAT16, or FAT32. Formatting a storage device as Mac OS Extended with journaling is recommended, as it may provide some more resilience if the device is removed or powered down while in use. Note: ExFAT and NTFS formats aren't supported.

If encrypted HFS+ were supported Airport Utility would provide some means for entering the password to decrypt the attached harddrive. The password would then be used by NetBSD, which is the underlying OS that exports the disks contents over the network, to mount the drive. This doesn't seem to be implemente yet.

Maybe someone actually owning a Time Capsule can test it and chime in.

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With OS X Mountain Lion, you assign encryption after the backup volume is selected. Once the location is chosen, use the System Settings in the Time Machine config to set your passcode (the encryption key is created from this) to encrypt the backup data. So, the drive is not encrypted the Time Machine data IS encrypted.

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