I admit the "18-month" stories have worried me, but I've had mine 22 months now with no problems like that. The only problem I have is that once every few weeks a print job will just wait in the queue and not print. Takes a restart of the Time Capsule and printer to resolve. It _could_ be a TC problem, or a printer or a driver or a cable problem.
Other than that, I love it! I've got the 500GB version from May 2008. It "hosts" an old USB 1.1 hub with my Canon iP4300 inkjet and a 16GB USB drive. It is my only router and wireless access point, with one iMac connected via ethernet and one XP laptop connecting wirelessly. It's used for my iMac backups via Time Machine, which has worked flawlessly.
As of OS X 10.6, it has shown ink levels for my printer. However, I can only run the Canon utilities for the printer (nozzle check, clean, deep clean, etc.) by temporarily plugging the printer directly into my iMac or by doing them from the XP laptop. Not a biggie for me since I've never needed to run them! But, be aware that support for fancy or non-standard printer features may vary by brand and model.
I don't remember having any problems at all setting it up, even getting it to work with the XP system fine. As far as I can tell, performance has been just fine.
I would recommend it for space saving and simplicity.
Brian33.