I'm exploring adding a new Extreme to the basement, wired to the current Extreme.
By far the best way to extend a network, since the Ethernet cable maintains maximum network bandwidth. This is the way the pros extend a network.
Do I need to address channel configuration? Or is using 'automatic' sufficient?
"Automatic" will work fine, but if you want to set the channels manually, you need to separate them by at least 4-5 settings. So, if one AirPort is on channel 1, then the second should be on 6 or higher for 2.4 GHz. For 5 GHz, just use a different channel.
The second option gives you more of a "gap" between AirPorts so you may notice a slow down in signal about mid way between the AirPorts depending on the number of walls, ceilings, or other obstructions the signal must pass through. Same rule for setting the Channels applies.
In both cases, I'm likely adding in a switch, since all three LAN ports on the current Extreme are in use
Make sure that you get a Gigabit Ethernet switch to take full advantage of the Gigabit Ethernet ports on the AirPort Extreme.
I referred to this Apple KB article which is very helpful
The article does have some good general information, but it is several years old and assumes that you are using the Leopard or Snow Leopard operating system on your Mac.
If you are using Lion or Mountain Lion, things have changed, (and Apple is now almost 2 years late in providing updated information specific to using Lion and Mountain Lion), so you will become very frustrated if you try to configure things according to the older article.
Post back for some tips when you are ready to move forward with the Ethernet connected AirPorts.