The device uses the same crystal oscillator for Low-frequency Oscillator and Timer/Counter Oscillator. See Low Frequency Crystal Oscillator for details on the oscillator and crystal requirements.
On this device, the Timer/Counter Oscillator Pins (TOSC1 and TOSC2) are shared with XTAL1 and XTAL2. When using the Timer/Counter Oscillator, the system clock needs to be four times the oscillator frequency. Due to this and the pin sharing, the Timer/Counter Oscillator can only be used when the Calibrated Internal RC Oscillator is selected as system clock source.
Applying an external clock source to TOSC1 can be done if the Enable External Clock Input bit in the Asynchronous Status Register (ASSR.EXCLK) is written to '1'. See the description of the Asynchronous Operation of Timer/Counter2 for further description on selecting external clock as input instead of a 32.768kHz watch crystal.