Thank you @pascal.roques and @StephaneLacrampe for your input. It is good to know that I am not missing a trick within the tool. I will be able to achieve what I would like by looking at which functional chains have involvement to the capability then selecting them when creating the contextualized diagram. I will get a member of my team to looking into creating a python4capella script to automate all the creation of the diagrams in just a few clicks. I think this could be very useful in the future.
It is interesting however that this presentation (hyperlinked) given by Stéphane at the INCOSE Workshop 2020 shows the following image on slide 13.
This shows the importance of having a strong association between capabilities and functional chains/scenarios. Do we need to reconsider the reasonably weak link between between functional chains and capabilities given this meta model? Functional chains are a new “big thing” in MBSE but they do not tell the whole story to describe use cases/high level functionality… that link to the capability is needed.
@SMonier, currently for my use case it is manageable to create one SAB per capability however I am currently only working at the system analysis level. If we wanted to achieve the same at the logical or physical layers then I agree with you that you might need several xABs to fully describe the capability. One bit of functionality that might be useful was asked about in this thread recently… (without a response)
Contextual elements - combinatorial logic
You could select a capability and for example a mode with AND logic to reduce the diagram down. Not available today however but I do think that having AND/OR options when contextualizing a diagram would be really powerful!
One tool that I do find useful however is the copy and paste of diagram layouts. You can copy the layout from a master xAB then paste it using the elements shown. This means that for each diagram you don’t have to work out/re-organise the layout each time.
Thanks 
