If AirPort Time Capsule is compromised, will it disclose contents of encrypted backups?
There are two ways of having backups encrypted. 

First, Time Capsule allows for you to encrypt the disk. If you enable this, the disk can only be mounted by the device if you provide it with the password to do so. This encryption is local and thus doesn't address your concern. It does mean that if the disk somehow gets taken out of the TC, it can't be read. 

Second, data stored on the Time Capsule as an encrypted volume. This is a setting in your computer and can be set on your Time Machine backups but also for any other volumes you store on the network drives (or anywhere else for that matter). This data can only be decrypted with the password. This data gets encrypted and decrypted on your computer, and although others might be able to see your backup volume, they won't be able to read it.