I would go with the Time Capsule. The hard drive is built right in, and I've had no problems whatsoever with mine. If you decide to get an Airport Extreme with, let's say, 2TB of storage, it's going to cost the same as a 2 TB Time Capsule. And of course the Time Capsule is smaller and a lot more portable. You can tuck it away disguised as a book in a bookshelf or something!
Also, it you get an Airport Extreme, you have to manage three wires and two devices instead of just one wire and one device. And if the hard drives falls over and the wire disconnects, you'll just stop backing up and you won't know until a week or so later when Mac OS X alerts you. And lastly, the hard drive will be connecting to the Airport Extreme through USB 2.0. That's SLOW!! Backing up and restoring from a backup will take forever! Time Capsules are much faster, and I can even use mine as a server for accessing my iTunes content instead of storing everything on my computer, it's great! The Time Capsule is the better buy in my opinion, and if for whatever reason it costs ten dollars more than the Airport Extreme and hard drive combination, it's still definitely worth it.