Use AirportExpress model A1088 to connect to TimeCapsule for AirTunes only

Run iStumbler from your Mac. (Get it here). Look at the other wireless networks in your vicinity - and check what channel(s) they're running on. You want your device to be as far away from those channels as possible. There is a 3-channel overlap. That means, a device on channel 1 will interfere (albeit only slightly,) with a device on channel 3 (or 4? I forget.) So if lots of devices are on channel 6 (most come out of the box on this channel,) you want to be on 9/10/11 or 3/2/1. I almost always just use 1 or 11.

There is also a "use network robustness" option which I think increases range but decreases bandwidth. See this Apple Article.

Yes, assuming the express (and the PLC link) is in bridge mode, you will have one network so AirPlay, AirPrint and Bonjour will work like you have one router and everyone is in range or plugged in to the ethernet.

You can use the same SSID on both wireless networks, but then you can't choose which network you are joining if you start on one and the connection is simply better.

The big downside of PLC or ethernet link is you don't get automatic switching of the base stations if a device starts on the main and doesn't leave the signal range. You can remedy this by reducing the transmit power on the main station to ensure that by the time you get to the bedroom, the existing link is lost and the device has to join the express.

Making two SSID networks allows you to know which base station you connect - not leaving it to the software to determine based on a short measurement of the two signal strengths when you "join" the network.

Whether you have one SSID or two, I would recommend selecting different channels for both transmitters as far apart as practical or consider reducing the transmit power on one if you find bad interference in between the two wireless transmitters.

Use the logs and statistics graphs in Airport Utility to see the transmit speeds and which base station your devices are connected when you choose where to place the devices and what channels to use.