Can an Apple Time Capsule be used to store/watch movies on iPads in a car?
Theoretically, it should work. the Time capsule will just go into infrastructure mode, creating a self-made IP, and provide IP addresses to the iPads. So you will get your own little wifi bubble in the car, connected to nothing. But, the iPads will be connected to the time capsule. 

However, you need more than that: iPads don't have a file browser to be able to find the movies on the time capsule hard drive. They really need iTunes running to serve up those movies.

So, now you need a laptop, plus the time capsule. (or now just wifi router, since you don't need the hard drive in a time capsule, you have a laptop)

You could do this with a DLNA server app, and a DLNA viewer app on the iPads as well, if you don't want iTunes, but you still need something to serve as the DLNA server. You could use a wifi router combined with say a WD My Cloud hard drive, or similar for example. This would eliminate the laptop, but you still need another device.