How to Best Use/Configure Time Capsule and Extreme Router Together

For best overall bandwidth performance throughout the house, you will want to run an Ethernet backbone throughout the house ... at least to the locations where you will be placing each of the base stations for wireless coverage. As an alternative, you could also explore using PowerLine adapters if running Ethernet is out of the question.

Assuming you go for Ethernet, the base station connected to the Internet modem, will be your "main" base station. You would not need to wirelessly extend the main using a WDS, instead, you will be configuring the remaining base station into a "roaming" network.

Here are the basic steps to do so:

Basic network configuration: DSL/Cable Modem or Internet Router > (Ethernet cable) > [WAN] base station#1 [LAN] > (Ethernet cable) > [LAN] base station#2 [LAN] > (Ethernet cable) > [LAN] base station#N

Setup the base station connected to the Internet to "Share a public IP address." Apple recommends using the Time Capsule as the main.
Internet > Internet Connection > Connection Sharing: Share a public IP address

Setup the remaining base stations, as bridges.
Internet > Internet Connection > Connection Sharing: Off (Bridge Mode)

For each base station in the roaming network:
o Connect to the same subnet of the Ethernet network
o Provide a unique Base Station Name
o The Network Name should be identical
o If using security, use the same encryption type (WEP, WPA, etc.) and password.
o Make sure that the channel is set at least three channels apart from the next base station.

Each Express would be connected to Ethernet back to the AirPort that is connected to the Internet modem. Then each Express would be configured as I mentioned in the previous reply.