Replacing the Internal Time Capsule Hard Drive I'm trying to install a new hard drive in my TC after the original one died, but to no avail.

I bought a 1.0TB 3.5 WesternDigital SATA disk and formatted it for OS X using a SATA-USB connector. It worked and the disk is usable. BUT as soon as I plug it back in TC and power it up, TC displays its amber non-flashing light and its wifi stops working.

However if I remove the HD, the wifi gets back on its feet...

May some TC genius come to the rescue of my troubled soul.
You need to let the TC format the drive. If you can't make that happen using a reset + reconfigure from the AirPort utility, you might have an incompatible drive (i.e. Needs more power or cannot be used due to incompatible features).

It's not going to work like an external drive that happens to be built in, the TC OS needs to manage the disk. OS X can read such disks, so it might seem like any normal formatted disk if you hooked up the old one.

If you still have the old drive, you might have more luck cloning it to the new one prior to installing it. 

Also, if wifi doesn't work, ethernet might still work, especially if the Time Capsule needs a reset.