"When I became England manager I was sure the players were really good but I didn't understand why certain players were not the same with the national team as they were with their clubs."
The breakthrough moment for England, according to Capello, came in Zagreb one year ago when Theo Walcott hit a hat-trick as England thrashed Croatia 4-1 in their World Cup qualifying tie.
"They changed their psychology completely," he said.
"The first step was when we won against Croatia, the confidence came after that.
"We always played well away from home, the problem was Wembley."
Capello also admitted he would give his squad players a chance to impress in the run up to the World Cup as he makes contingency plans for injuries.
"I hope we can choose the best players, but it is possible someone will have an injury," he said.
England are World Cup contenders - Benitez
"I hope they will be fit for the World Cup but I think we will have to prepare another option and during the friendly games I will prepare this option," he said.
Having banned talk of South Africa ahead of Wednesday night's game against Croatia, Capello finally began to outline some of his plans for next summer.
The former Juventus and AC Milan boss revealed he hopes to help his players deal with the effects of playing at altitude by basing their training on high ground.
And, on the subject of the 'wives and girlfriends' or 'WAGs', which overshadowed Sven Goran Erikkson's spell in charge of England during the World Cup campaign in Germany 2006, Capello was philosophical.
"The players need to meet their wives and girlfriends, but it will be for one day after each game," he said.
"We are in South Africa to play, not holiday."
Former England midfielder Sir Trevor Brooking expects the national team to improve further with players returning from injury.
"The squad's got better. Players like Rio Ferdinand, Theo Walcott and Stewart Downing will all come back," he said.
England could also welcome back Chelsea's Joe Cole and Manchester United's Owen Hargreaves before next summer, with both midfielders currently recovering from long-term knee injuries.
If you look at our goal scoring record it is as good as anyone, that is something we haven't done in the big tournaments or even qualifying before
Sir Trevor Brooking
And Brooking, now the Football Association's director of football development, believes England are also well equipped in attack, with Wayne Rooney the top scorer in European qualification and Jermain Defoe staking a claim to take Emile Heskey's place.
"There was lot of debate about whether Jermain Defoe would start against Croatia," Brooking told BBC 5 live.
"And in Peter Crouch and Carlton Cole we have got some quite good attacking options now.
"If you look at our goal scoring record it is as good as anyone, that is something we haven't done in the big tournaments or even qualifying before."
Meanwhile, England are expected to be rewarded for their 100% qualification with a top seeding in the World Cup group draw in Cape Town on 4 December.
As hosts, South Africa are guaranteed top seeding with the other seven set to be allocated through a system that has tended to include both results from previous tournaments, as well as taking into account current Fifa rankings.
England have reached the last two World Cup quarter-finals and are ranked seventh in the latest Fifa list.
Brazil and Spain will also get a top seeding among the sides that have already qualified, while Italy, Germany, Argentina and France - should they qualify - would also be likely to be seeded.
There is expected to be thousands of England fans making the journey to South Africa and, as of 1 September, more than 45,000 tickets had been sold to residents from the United Kingdom, with only the host nation and the United States having sold more.
Meanwhile, England fans have been warned to be on their guard against ticket scams when booking trips to next year's finals.
Association of British Travel Agents (Abta) spokesman Sean Tipton said: "We're saying that when you book, you should do so with a company authorised by Fifa.
"In the past, we have had instances of people booking trips for major sporting events and then finding that their tickets did not materialise."
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.