Can you see the time capsule and airport express on the iMac?
Try unplugging the time capsule for 30-60 seconds and plug it back in. Give it time to boot up.
When the drive in my time capsule failed it did some wonky things before refusing to boot back up from power cycling it.
I can't, they appear as missing (with the little yellow triangle next to them).
Tried power cycling but, as I said before, they appear for maybe 30 seconds and then disappear again.
Not sure what's going on, it worked perfectly right until I updated.