"I was looking into getting a 1tb Time Capsule. Is this the best option for quality/price? I'd like to have the best option for the cheapest possible."
DON'T get a Time Capsule. They have a very high failure rate, often dying at the age of 18 months. They're too expensive, anyway. Do a search right here on "Time Capsule" and you'll see why.
DO get a hard drive and back up RIGHT AWAY. If that music collection is important to you, you had better get at least a second copy of it all somewhere. Actually, you really need a _third_ copy, as well -- again, if it is "important" to you.
Others here will comment about external hard drives, but I'd like to suggest an alternative course. Check these out:
http://www.amazon.com/s/ref=nb_sb_noss?url=search-alias=aps&field-keywords=usb+sata+dock&x=0&y=0
(various items shown)
Once you get one of those, buy a "bare" hard drive to go with it.
Or - better yet - buy TWO bare hard drives, and do "rotating backups". Did I hear you say that this was your "life's collection"?
Best solution is to do two backups, and store one of them in a different location.
Since your collection is a large one, you might even consider a Firewire 800 docking station, which will allow you to backup much more quickly than with USB2.
If you go to Other World Computing, they have their NewerTech Voyager Q Firewire 800 docking station on sale right now:
http://eshop.macsales.com/shop/NewerTech/Voyager/Hard_Drive_Dock
They also have complete docking station/drive bundles available.
DISCLAIMER: I have no financial connection to OWC, other than being a customer.
Another good source for bare hard drives is newegg.com.
I'd avoid Hitachi drives, have had two failures from them lately. I'm leaning towards Seagate as the best choice out there right now. I'd avoid Western Digital and Maxtor as well.
As for backup software, I would suggest CarbonCopyCloner (free/donationware). Easy to set up and use, and far, FAR preferable to Time Machine.