Time Capsule 802.11n - Router Perfomance Issues...

I am wondering if someone can please advise on what, if anything, I'm doing wrong with setting up my Time Capsule, or if this is it's expected behavior...

I currently have fiber optic into my house, it uses a ZyXEL FSG1100 ("An active Ethernet gateway"). I have that connected to a Linksys E3200 Router which serves wired and wirless connections through my house. Everything works great.

I decided to buy a close out Time Capsule 802.11n 2TB model for three reasons: To replace my router, use Time Machine for my laptop, and have a easy wireless printing solution.

First thing I did was unplug the Linksys and plug the Time Capsule in. I reset everything, followed the instructions via the manual, and configured the Time Capsule with the Airport Utility to what I thought would have it behave as the new router (via the Airport Utlitly settings - it said it was now in "Router Mode: DHCP and NAT"). I updated the firmware and it works but the performance is terrible, both wirelessly and via ethernet, just obvious terrible load times compared to what I am accustomed to. I then decided to plug the Linksys back in and plugged the Time Capsule into that, the Airport Utility settings now say "Router Mode: Bridge"). I assigned the Time Capsule a new network name and password and then connected all my devices to it. The peformance is now back to what I expected however I am unsure as to why I need this extra piece of equipment (the Linksys)? I was under the impression that the Time Capsule should operate as a router with no degredation to performance.

Any insight, thoughts or suggestions would be greatly appreciated.

Thanks!