problem connecting ap extreme and express w' ethernet

Hi all, sorry for the lengthy post -

TLDR Version:

I tried connecting my airport express to my airport extreme to give me a dedicated connection to stream music to an attached stereo. Once I connected the ethernet we were unable to surf the web. Configuring the express was impossible as it ceased showing any options in the Airport Utility.

Full Version:

I have a airport extreme (previous generation dual band) in my home office. I use a 1st gen airport express as an airplay device for my stereo, which is connected directly to it via optical. Both the Airport Extreme and Express are in the same room, approximately 10 feet from each other (the express is on the floor by the stereo and the extreme is on top of the bookshelves nearly directly above it.

I use airfoil to stream non-itunes content such as spotify to the stereo.

Occasionally I get incredibly lousy performance, resulting in pops, static, and dropouts of music. I contacted the makers of airfoil, who insist it is due to wifi interference.

So, I first connected my mac directly to my airport extreme and turned off wifi on the mac. So that part of the chain is going through gigabit ethernet. Today I still had some dropouts, both on ethernet (my iMac) and wifi (my macbook).

So my next thought was to connect the Extreme to the Express with ethernet as well. Once I did that I essentially was unable to surf the web. The airport extreme showed on the Airport Utility but with the green light greyed out.

What did I do wrong?

Settings were:

Airport Extreme

Provide DHCP and NAT

Airport Express

Extend the Network

Thanks in advance!
Matt