I know that there is currently no way to configure time machine to limit itself to the ammount of disk space it uses. It simply keeps going til it breaks (runs out of HDD space)
I've not used TC to any great lengths, but from what I've read, it performs "incremental" back ups and not "full" backups. That means that your first back up takes ages because it copies everything
, Then as you create/edit new files on a daily basis it only
copies those files that have changed. So if you delete your back up files. It will simply create new ones. However it'll take a while again.
There is some light at the end of the tunnel however. There seems to be some folks talking about creating a disk image on the device. That means you can effectively limit the amount of space it takes up.
You can find that discussion here
hope i've been some help