If it is not a simultaneous dual-band Time Capsule, it will not create a guest network. It requires the newest hardware, and thus cannot be added via a firmware update. Also, if it is being used as anything other than the primary router, the guest network feature will not work. If it is a simultaneous dual-band version and set up as primary router, you may need to upgrade your AirPort Utility. Try installing it from the disc provided. Also, this page may help in locating the guest network setup page in AirPort Utility.
http://discussions.apple.com/thread.jspa?threadID=1938190
Edit: bigchrisfgb, may I suggest either posting in a thread that is more relevant to your question or searching in MRoogle? But to answer your question, yes it can be used as a network attached hard drive. Beware however that anything stored on it will not be backed up via Time Machine, it cannot be partitioned (easily), and Time Machine will back up to it until it is full. You may run out of room to store files. I would suggest purchasing a USB HDD, connecting it to the TC's USB port, and using that for external file storage and the TC's internal for TM backups.