Is an external drive connected to Time Capsule also backed up? If I connect an external hard drive to a Time Capulse, it that drive also backed up to the Time Capsule?
No, that won't work. Simply connecting the external drive to the Time Capsule wouldn't start a backup by itself, because, counter-intuitive as it may seen, a Time Capsule doesn't know anything about backups: the Time Capsule is, in effect, just a network attached drive -- it doesn't back up anything by itself, but rather just makes storage space available to a Mac to be used, among other things, for backups; such backups must be entirely managed by that Mac, running the Time Machine software provided by OS X, which is what actually performs the backup process. No Mac, no automatic backup.

What Time Machine can do is back up an external hard drive physically connected to your Mac (via Thunderbolt or USB), so long as it is formatted using HFS -- if it's in FAT32 or NTFS format, Time Machine won't back it up. That's not your case, since you've plugged the drive to the Time Capsule and not the Mac -- the only way you can access that drive from your Mac (which, as explained above, is what actually performs the backup) is via the network. Quoting from Pondini's excellent Time Machine web site:


  Time Machine can easily back up multiple internal and/or directly-connected external drives and partitions simultaneously (but Time Machine cannot back up data that's on a network).


So if you really want to back that drive up, you'll have to connect it directly to a Mac, make sure it is in HFS format, and follow the instructions on the link above.