Is there a difference between these two words? Their definitions are pretty similar, but I might be missing a subtle difference.
Yes. there is a difference, in the noun form. I have the capability to knit – that is to say, I possess two hands and the mental intelligence to learn plus some yarn and knitting needles – but I have little ability at knitting, which is to say “I’m not good at it.” With practice, I can improve my ability. My capablility will not change.
In adjectival form, I think the difference is less.