What type of audio cable needed to connect airport express to a stereo

An airport express will connect directly to your current amp with the correct cable. The airport express has a socket which takes a 3.5mm stereo jack plug. The socket serves as either an analog or digital connection. Mine is an older model Airport Express. They may have changed this spec on the newer models. I have mine running into an analog amp in my bedroom using a 3.5mm mini-jack plug to two phono connections.

Airport express specs:

Interfaces

• 802.11n wireless
• One 10/100 Ethernet port for connecting an ADSL, cable modem or Ethernet network
• USB port for connecting a USB printer³
• 3.5mm audio minijack for analogue or optical digital sound⁴
• Built-in power supply

If I purchase an airport extreme, will this enable me to set it up with the airport express to do this?

Yes, you can configure your network with both AirPort models that will support iTunes streaming.

What type pf "audio cable" is needed to connect the airport extreme to the stereo? I am concerned about type of connection because my receiver is from the 80s.

Audio equipment, in that era, had (as a minimum) RCA-type audio jacks. Typically, in pairs, for right & left channels ... aka Stereo.

You would need an audio cable with a 3.5 mm stereo audio connector on one end and the other a pair of RCA plugs. The following would be an example of such a cable.

Tesserax is right on with both points. In fact, since the audio signal coming out is analog, it's the best connection you could get for your 80's era receiver. Unfortunately, for a current receiver, that jack is forlonly out of date - you could use it, but the best connection for current systems would be a digital output of either coax or optical. 😟

Would it be the same problem if I bought the apple tv instead. Im assuming it would since this is an output/input issue.

The Apple TV 2 provides audio either via a HDMI or digital optical connection. Neither, unfortunately, will work with your analog receiver.

If I decide to upgrade recivers, is it best to go with something that has airplay to accomplish this?

If you are planning on upgrading, then I would second your though on considering receivers that are AirPlay-ready.