Everything works. Follow directions for extending your wireless network at:
I first connected the Time Capsule directly to the AirPort Exteme to avoid any powerline networking issues. This allowed both the time capsule and airport extreme to show up in the AirPort Utility program.
Ensure that in the AirPort Extreme's wireless settings, "Allow this network to be extended" is enabled/checked before you modify the Time Capsule's settings; the "allow... extended" checkbox might not be visible if you are not directly connected as a client to the AirPort Extreme (it is not visible after setup when you are a client of the time capsule extender).
The Time Capsule network setup is easiest if you follow the dialogs instead of doing it manually.
I now have cable modem->ABEX->Netgear HomePlug-> Netgear XAV1004 switch-> Time Capsule->extended wireless network->laptop. The powerline adapter signal is running from a new house addition built in 1999 through a sub-panel circuit breaker to a main circuit breaker out through 1940s-era wiring, and everything works perfectly, including Time Machine backups from machines on both sides of the powerline adapters.
@LaPastenague: I haven't detected any ports blocked by my Netgear powerline adapter, nor could I find any port blocking topics via an internet search. I have never installed any of the Netgear management software, so my powerline adapters are not running any encryption... maybe encryption comms cause the issue you raised? I really doubt the Netgear PowerLine adapters block any host-specific ports because the adapters are working at the physical and data-link layers which are below the port assignments in the transport layer of the OSI model.
This will work. I had to go through the setup process again and here are the only steps that worked for me.
Worst-case fail-safe setup instructions:
1) reset the time capsule to factory settings (software reset is okay; contents of the disk will not be erased.)
2) use an ethernet cable to connect the Time Capsule's WAN port to one of the Airport Extreme's LAN ports.
3) run the Airport Utility's assisted setup for the time capsule to have the time capsule connect through ethernet and extend the airport extreme's network. After setup completes and the Time Capsule restarts, proceed to the next step.
4) unplug the Time Capsule's power cable, then disconnect the ethernet cable between the time capsule and airport extreme
5) plug the Time Capsule's WAN ethernet port into the already-setup powerline ethernet adapter in the remote location.
6) plug the Time Capsule's power cable.
When you are extending a network, the Time Capsule copies settings from the Airport Extreme. I couldn't manually tune settings to get a properly working network extension without factory-software-resetting the Time Capsule because there are some hostname settings and failsafe behaviors that are hard to "get right".