Try downloading
iStumbler to help understand the signal strength and environment around your network. The "bars" on the Airport icon are not a very good indicator of signal strength, and they tell you nothing about the noise on your network
Power down the AirPort Express and move your laptop to an area very close to the location of the AirPort Express. Are you getting at least 50% signal from the Time Capsule? If not, move closer to the Time Capsule and wait a moment for iStumbler to recalculate your signal strength to see if that location will work better for the AirPort Express.
It will take some time and experimentation to find the best compromise for the AirPort Express location. If it winds up at a position that is half way between the Time Capsule and the area where you need more coverage, that's OK.