wireless storage for Time Machine?

While I would LOVE to get a 1TB Time Capsule and use it with Time Machine on my MBA, that is a whole lot of money when I already have a wireless router that works just fine and I can find 1TB of storage for much cheaper than that... My question is, what are my other options?? I have a Mac mini so my first thought was to plug a big ol' USB HD into that and have the MBA backup to that... Well I could access files on the HD from the MBA just fine but Time Machine refused to use it for backups...

I have seen little wireless adapter boxes with USB ports for adding printers and HD's to your home network, would something like this work or would I run into the same issue with Time Machine not wanting to use it as a backup device? Is the Time Capsule really my only wireless choice??? TIA!!