Unfortunately, it is going to be extremely difficult to configure your new AirPort Extreme to work with the older AirPort Express to do what you want.
And if you do so, you will lose all of the "n" wireless capabilities of your new AirPort Extreme. It will perform no better than the "old" AirPort Extreme that you replaced.
Things would be incredibly easier and you will have light years better performance if your budget allows you to use a new AirPort Express 802.11n.
Is that a possibility?
Well yes kinda so. I had it set up with it extending my airport extreme. Then one day it wasnt working anymore so I reset my airport extreme and express and now the xbox doesnt even recognize that my express is connected to it. I think this is because it does not give me the option in airport utility to "extend the network". I can only "join" it
Thanks for the help btw this is much appreciated
This is why I am confused.
The "g" AirPort Express does not have a setting to "Extend a wireless network". It does not exist. This is only found on the "n" version of the AirPort Express.
You may likely have been using a different type of setting with your old Extreme called WDS before you made the "switch" which will allow a "g" Express to extend and provide an Ethernet signal.
But, WDS is a nightmare on a new AirPort Extreme. The version of AirPort Utility that is provided with Lion 10.7.3 does not even allow this type of configuration.
As I said, WDS is a nightmare for most users. Apple hides the settings from users to discourage use of WDS.
I do not recommend that you do this, but have a feeling that you will do this anyway.
I will not be able to help you sort out WDS problems.
On AirPort Utility 5.6, click Manual Setup
Click the Wireless tab below the icons
Hold down the option key on your Mac while you click on the Wireless Mode selection box and the WDS settings will appear
Apple's instructions for WDS are here:
Hope this helps. Good luck.