I would think it is too slow for this. I have a Time Capsule, which is just an Extreme with a hard drive built in. It's fine for backups and what not, and fine for streaming stuff to Apple TV or iPhone via Airfoil, but in general, it shouldn't be considered a drive that you can edit media files from. Word processing, etc would be fine.
Among other challenges are the temp files that an app may want to make. All of a sudden, your audio editor is wanting to write a file in the background, to the source directory, and there goes the bandwidth.
So, to recap...great way to have un-connected backup, iTunes files, etc. Bad idea for editing a media file from.
My $.02,
keytohwy