Airport express (A1392) not extending network and airplay dropping out frequently.

I have my wireless set up coming from local ISP Modem into Time Capsule and an Express (A1392) set to extend network. Problem is it doesn't seem to extend the network at all. It's set up in a window looking out on my deck and right out side the window I often only get two bars on my i-phone. the signal will fluctuate from full strength to two bars them back up again. Airplay often drops out for a second, I assume this is related.