Since you elected to have the Extreme in the same room as the Arris gateway, the wireless radios on that gateway will need to be disabled so that they don't interfere with the Extreme.
1. Am I correct that the process you've outlined will create a single WiFi channel?
With my comment above, you would end up with a wireless network on each band with one or both of those bands extended by the Express. Which one or ones will depend on the model of your Express. The 1st gen model can extend only one or the other; whereas, then latest version can potentially extend both.
2. Will it be 5GHz or 2.4 GHz?
Most likely, the 2.4 GHz band will be extended as the 5 GHz band has a much more difficult time penetrating through walls.
3a. If yes to #1, what are the downsides to only having a single channel?
Ok, channels and bands are two different, but related, things. Each Wi-Fi radio band (2.4 or 5 GHz) can have a number of channels. For example, in the US, there are 11 channels on the 2.4 GHz band. However, only channels 1, 6, or 11 do not overlap. The AirPort routers try to use a channel which has the least amount of Wi-Fi interference nearby ... so you do not necessarily need to choose a channel. This is also true on the 5 GHz band.
What you are really asking is there any downsides to only having a single band? The answer is: maybe, but it will depend on your networking goals. The 5 GHz band has greater bandwidth (speed) potential, but is limited in range.
3b. Is there another path forward that would both leverage existing equipment AND enable dual channel setup?
Yes ... but it would require using an extending device that is compatible with the Arris gateway. The AirPort base stations were designed to extend other AirPort base stations. This is true with just about any router manufacturer.
With your current networking equipment you will have to make compromises to make it work ... and still may not get the results you are looking for.