Ok, so I've heard that you can plug in a USB drive and use it as additional Time Machine space. But can you use it as a shared hard drive like with the standard Airport Extreme Base Station?

Yes and No. You should be able to share up the drive and use it from another computer, but it isn't technically NAS. It's just a shared drive on a computer (i.e. you can't use it without the other computer being on).

However, I believe you could use it for Time Machine, as opposed to Apple's AEBS, which many folks foolishly bought because they believed Apple's hype that it could be used for Time Machine. (Although some would argue Apple can't even get the drive part working correctly with the AEBS, let alone allowing it to be used with Time Machine).

Time Machine has a few flaws - there have been problems when Time Machine was used to restore entire drives, and Time Machine has problems with multi-file databases.

I'm not 100% certain on this, but I believe Time Machine treats packages as regular folders when it shouldn't. Packages should be backed up atomically. This may be fine for applications, but database packages and other packages where individual files inside change can cause problems if they're not all backed up together.

That and like Spotlight, Time Machine has no way of querying database systems, making restoring of individual records a challenge.

I'm not sure even treating it as a package will solve all the problems. Most likely the problem occurs partly due to the database being updated while the back up is happening. Yet, because the OS sees the package as folders and files, even if Time machine backed up the whole shebang, it probably would still parts at the wrong time.

This is one reason computers tend to be backed up 'after hours', as there's just too much of a chance for things to go horribly wrong when trying to backup open files.

I agree with testudo.

The problem is that concurrent access during backup could cause data inconsistency. Otherwise it wouldn't be a problem either way: backup the package atomically or as individual files -- as long as there is no access conflicts, they are equivalent.

"Time Machine silently and automatically tracks each version of every file, allowing users to metaphorically go back in time to retrieve any version of a document desired."

This statement is misleading. Time Machine backs up on intervals, not every time a file has been modified. If you make 12 changes and subsequent saves to a document within a 1 hour period (not at ALL unrealistic), you only get a backup of the file at the end of the 1 hour mark, not all 12 versions.

I'm not saying I would want TM to back up every time I save a file, as that would be insane. Just think some clarification in the article is needed. TM is not a revision tool.