What I mean is giving your generation 1 Pokemon a held item that was released in G/S/C and then using the Time Capsule to trade it back over to R/B/G/Y so that you have a gen 2 item in your bag. Or are items prohibited from the trade? If not, what would happen if you brought a TM for a move such as Attract back into gen 1? Not only is it an item introduced in gen 2, it only works depending on each Pokemon's gender, which doesn't exist for any Pokemon except Nidoran in gen 1.
Would you even be able to teach the tm to the Pokemon? I read up on the Time Capsule on Bulbapedia but it didn't really have this information.
Actually, the Time Capsule will allow held items to be sent back. Yes, Gen I doesn't know about the items, but Gen II gets around this by hiding the item byte in the "catch rate" byte of the Pokémon when you send it backwards to Gen I. Since catch rate is never really used or modified by Gen I after initial catch of the Pokémon, the catch rate byte is safely exploitable. Gen I games will of course not know that the Pokémon has a held item, but when you send that same Pokémon back to gen II, the held item will be perfectly intact.
Conversely, the reason that Pokémon who started in a Gen I game come to Gen II with an item in tow is because the catch rate of the Pokémon in Gen I is deliberately mapped to a particular item in Gen II.
the answer is pretty obvious, NO.
just like you cant transfer a gen 2 Pokemon over to gen 1, same goes for items, the games just doesnt have the data on these Pokemon/items.
There is a glitch where you can tranfer a gen 2 Pokemon only if it knows gen 1 moves, however that Pokemon will be a glitch Pokemon.
Source: logic and the link above.