I was told it would work wirelessly.
It will. The Time Capsule might be set up correctly now, but you might really be having a problem with setting up Time Machine correctly to backup the data on your Mac.
I'm not sure on whether you want to try to troubleshoot the existing setup, or go with the new wired setup that you see further below.
I looked like it was set up but there were no backups.
That is a different issue, which can occur no matter how the Time Capsule connects to the AirPort Extreme. So, simply setting up the Time Capsule to connect using a wired Ethernet cable connection will be no guarantee that backups will suddenly start working as a result. More work may be needed to get backups going.
But, I didnt know Id lose so much speed
Unfortunately, this is a nature of the beast when you try to use a WiFi connection to extend a network. That is why we always recommend a wired Ethernet cable connection whenever possible.
please tell me how to hook up time capsule up by Ethernet to the airport.
Step by step instructions are are provided below to do this.
However, please understand that even if you have things set up correctly, there may be more troubleshooting involved if you are having backup problems with the Time Capsule. In other words, the real issue might not really be in how the Time Capsule connects to the AirPort Extreme, the real issue may be something else.
If you want to proceed with the wired connection setup, please follow the instructions carefully.
- Power off the Time Capsule and move it to the area where the AirPort Extreme is located.
- Connect an Ethernet cable from one of the three LAN <--> Ethernet ports on the back of the AirPort Extreme to the WAN "O" port on the Time Capsule
- Power up the Time Capsule and let it run for a minute or two
- Hold in the reset button on the back of the Time Capsule (next to the AC power port) for 7-8 seconds, then release and allow a full minute for the Time Capsule to restart to a slow, blinking amber light status. A red box outlines the reset button in the illustration below

- On your Mac.....click on the WiFi menu icon at the the top of the screen and look for a listing of New AirPort Base Station
- Just below that listing, click directly on AirPort Time Capsule

When you click on AirPort Time Capsule, that will open up the AirPort Utility setup "wizard" window automatically.
The wizard will take a few seconds to analyze the connection and then suggest the correct setup for the Time Capsule. You will see a window that looks like the illustration below, except that you will see the Time Capsule pictured and the name of your wireless network

- Type in a device name that you want to call the Time Capsule. You can use the same name that you used before, or a different name if you wish
- Click Next
Watch the next screen very carefully to see that the Time Capsule is being set up to extend using Ethernet. This will confirm that the setup wizard has picked up the wired Ethernet cable connection and the correct settings will be applied to the Time Capsule

When you see the message of Setup Complete, click Done
More adjustments to the Time Capsule settings will now be needed, but before we do that, please post back to confirm on your progress so far