I have inadvertently led you astray. You talked about your Time Machine drive and I had assumed (as in making an ASS out of U and ME) you were referring to an HDD in an external USB or firewire enclosures attached to you computer. Now I find that it is an Airport Time Capsule which is a Time Machine drive, but a special implementation of the technology as it is accessed as a SERVER resource through the CPU in the Time Capsule.
So, as you discovered it has to be formatted using the processor in the Time Capsule and that server knows Diddley about APFS so that is out of the equation. You can use it as a data storage drive but it will be SLOW. I do not believe you can move your User folder per. se. to that drive either. If you have the Time Capsule connected to your Mac via an ethernet port, your Mac does not need to connect to your WiFi, because it is physically connected to the Time Capsule and shares the Time Capsule's Internet connection and connection to any other devices logged onto TC's WiFi network.
My apologies for not getting back to you sooner, but I had major surgery Friday morning and a bit distracted and/or unconscious in the interim.
