Capon was caught after he began sharing explicit images of children in an internet chat room in late 2015.
The Taranaki man was denied parole in January 2018 and again in December.
The Parole Board report following his hearing on December 11 has now been released.
Capon is now 53 and will remain in prison until at least his next parole hearing in March.
The board's December 11 report revealed that Capon had completed a child sex offender's programme behind bars.
He said he found the programme "difficult" but was "happy with the progress" he had made.
A report from a prison psychologist stated Capon had addressed his sexual offending and had "developed a robust safety plan".
"He is deemed at low risk of sexually reoffending," said Parole Board panel convenor Tania Williams-Blyth.
During the programme Capon addressed his "distorted thinking" about his offending.
"While he was offending he considered that the victims were merely actors," said Williams-Blyth.
"He realises that he was lying to himself and they were not actors.
"Lying to himself, he thought that merely watching videos was in no way as serious as those who committed the crimes.
"Seeing himself as merely a voyeur was a lie."
Williams-Blyth said the sentencing judge who dealt with Capon commented that the primary motivation for his offending was "the thrill of the new acquisition".
"This was discussed with Mr Capon.
"He acknowledged that finding new objectionable material was a thrill and this was more so because it was forbidden and against the law.
"Now he says he doesn't need the thrill because the medication he is on is managing the highs and lows that he has felt.
"He will continue to take his medication and will engage in other activities such as voluntary work, church and hospice activities."
Williams-Blyth said Capon had also "learned to identify high-risk areas and feelings" and how to manage them while in prison.
"Two high-risk areas are not taking medication and not being busy," she explained.
"Two high-risk feelings were feeling worthless and high anxiety.
"The strategies to address these are to stay on his medication and to understand that the
feelings will not last, they will pass.
"He will also use distraction and diversion as strategies including his artwork and other creative activities."
Williams-Blyth said another high-risk situation for Capon was "not being employed or having no feeling of worth".
"If he is unable to engage in voluntary work then he will look at doing gardening, reading, building and walking," she said.
"He would also like to engage with a psychologist in the community.
"If he can afford to pay for a psychologist then he will do that, alternatively he will engage
with one through the public health system.
"Talking to a psychologist will assist him to develop further strategies for when he is feeling down. It will also give him someone sensible to talk to."
Capon told the board that "overall he feels that he has learned a lot and that his attitude has changed for the better".
The board declined parole for the sex offender as he did not have appropriate accommodation approved for his release.
Williams-Blyth ordered Capon to be seen again for further consideration of parole by the end of March.
