The Register points to a series of photos on Flickr by an individual calling themselves Nakedmac which allegedly shows that the hard drive inside Apple's Time Capsule storage device is a hard drive designed for desktop PCs and not for servers.
That drive in there is a Deskstar HDS721010KLA330 drive, the 7K1000 model with 1TB of storage capacity. It spins at 7,200RPM and has 32MB of cache. Hitachi's own PDF spec sheet for this drive lists it as being suitable for the following applications:
But does it matter? After all, Time Capsule is home to a single drive - that means a single failure point. If the drive goes down, your data is gone too. In the world of hard drives, one is none and two is one when it comes to redundancy.
Another issue here is that of defining the term "server grade." It's really nothing more than a fluff term (like "military-grade encryption") that you could slap on a bag of roasted peanuts. Availability and MTBF is what matters when it comes to hard drives (and even these terms need to be treated with care).
Sure, Apple's Time Capsule is a nice bit of kit, and anything that gets folks backing up their data is a good thing, but any marketing fluff that tried to give the impression that the device is any more robust or reliable than any other single-drive storage solution should be disregarded.