I did notice that in the backup directory, all the capital letters in
the filenames were replaced by quoted number strings. I assume that
this is a feature and is because of HFS case insensitivity. Is this
right? Is it possible to have the capital letters in the backup up
filenames?
Yes, that is exactly the reason. It is possible to have uppercase
letters
in the backup filenames, but not if the target directory is not case
sensitive (in other words, for the situation you describe: no). The
correct
case will be used if a restore is performed.