I don't see where in Airport Utillity there are the options mentioned above.
For the Time Capsule......we said to make sure the Time Capsule was set to allow its network to be extended
Open Airport Utility, click on the Time Capsule and click Manual Setup
Click the Wireless tab below the row of icons
Make sure that there is a check mark next to "Allow this network to be extended"
Click Update to save the settings

For the AirPort Express.....we said to configure the device to "Extend a wireless network"
Open AirPort Utility, select the Express, click Manual Setup
Click the Wireless tab
Wireless Mode = Extend a wireless network
Click Update to save the settings

Also, now, the Time Capsule, which is the first level of the network has been kicked off the network.
Sorry, you have lost me here. Checking the box to Allow the network to be extended on the Time Capsule will not affect the way the Time Capsule connects to the modem. You must have changed some other settings by mistake if the Time Capsule will not connect to the modem at this time.
Try restarting the modem and Time Capsule again to see if they will connect. Otherwise, you will have to start all over again with a Factory Default Reset on the Time Capsule and reconfigure it again as it was before.
Resetting an AirPort Base Station or Time Capsule FAQ