2 x Airport Express with modem and Powerline

1. Should I connect AE1 to the router via ethernet and then connect AE2 to AE1 via powerline? Or AE1 to the router by cable and then AE2 to the router by power line (so that both Airport Express units are connected to the router)?

Connect AE1 to the router using an Ethernet cable, just as it is now connected. Connect a short Ethernet cable from the LAN <-> port on AE1 to the powerline adapter near AE1.

At the other end where you want to install AE2, plug the powerline adapter into the wall and then connect an Ethernet cable from the adapter to the WAN (circle of dots) port on AE2.

2. Once point 1 is established, how do I setup AE2 so that my devices only see one wireless network? Do I simply change it from 'Extend a wireless network' to Create a wireless network, making sure that the network name and password are the same?

None of the above.

First, disconnect the Ethernet cable that connects from the powerline adapter to AE2, and temporarily connect it to an Ethernet port on a computer. Turn off the wireless on the computer and make sure that you can get a good Internet connection that way. Do not proceed until you have a good Internet connection during your "test".

Next, disconnect the Ethernet cable from the computer that you used to test and connect the cable back to the WAN (circle of dots) port on AE2.

Power up AE2 for a few minutes, then hold in the reset button on AE2 for 7 to 8 seconds and release. Allow a full minute for AE2 to restart back to a slow, blinking amber light status.

Make sure that the wireless is turned on at the Mac that you will be using to set things up and that it is connected to the wireless network that AE1 is already providing.

Click the WiFi icon at the top of Mac's screen and look for a listing of New AirPort Base Station.

Just below that listing, click directly on AirPort Express

When you click on AirPort Express, the setup "wizard" will open up and take a few seconds to analyze the network. Then, it will display a screen that looks like this, except that you will see your AirPort devices pictured along with the name of the wireless network that AE1 is creating.

Type in a devcie name that you want to call AE2

Click Next

The setup "wizard" will now configure everything for you on AE2 automatically.

Watch the next screen very carefully to confirm that AE2 is being set up to extend using Ethernet. This confirms that the setup wizard has picked up the Ethernet connection between AE1 and AE2, so that AE2 will be set up correctly.

When the next screen appears with a message of Setup Complete, click Done. And, you are done.

You now have what is known as a "roaming" network.

If you prefer........

During the setup of AE2, you can temporarily connect AE2 to AE1 directly using a short, spare Ethernet cable. Once AE2 is set up, then you can power it down and move it back to its remote location and connect it to the powerline adapter there.

Powerline is "iffy". It may work very well for you, or not so well. There is no way to predict how well it will work until you try it out in your home. So, it's a good idea to understand the store's return policy before you buy, in case you need to try another brand.

Nice work. It is all up to the powerline adapters at this point.

Let us know how things are working if you can.

Thanks for posting back. Glad that things are working well with the powerline adapters.