My question is when I put in the extreme, I will use the extend network setting to get wifi upstairs
Yes, but this is where Apple does not make it easy.......since you can extend using wireless and extend using Ethernet.
So, the first thing that you will need to do is reset both of the AirPorts upstairs back to factory default settings.
Then, get the new AirPort Extreme set up downstairs and working correctly.
If the AirPort that connects to the AirPort Extreme will do so using powerline adapters, then it will extend using Ethernet. You don't really need to worry about this, since the setup wizard will automatically set this up correctly. This AirPort will use the same wireless network name as the new AirPort Extreme, so you will have a much "bigger" network.
The other AirPort upstairs will extend using wireless and provide even more range for the network. Again, the setup wizard will choose the correct settings for you, since it analyzes the network and suggests the correct setup.
Post back when you are ready to install the new AirPort Extreme and we will take this step by step, starting with the new AirPort Extreme, to avoid confusion.
Now.....if you were perhaps thinking that you could remove the powerline adapters and have the upstairs AirPort extend the signal from the new Extreme using wireless, and then have the second Express upstairs extend the signal again using wireless.......that will not work, since the network can only be extended wirelessly one time, not two. So, more planning will be needed.