Airport Express flashing amber; help to create an Extreme/Express network

I am a novice with wireless networks, so please bear with me....and I appreciate any advice that is in laymens terms.
I bought an iMAC G5 and a MacBook Pro (both with airport cards installed). I set up an Airport Extreme base station and have my G5 connecting to this wirelessly. This works fine. I also bought an Airport Express to extend the wireless reach within my house and to eventually hook in my stereo.
Problem 1 - my Airport express keeps flashing amber and is not being recognized. It was briefly recognized last night (although flashing amber) but this has been very rare. I've reset it, plugged it/unplugged it, but nothing stops the flashing or recognizes the express.
Problem 2 - Since I'm using an Extreme as the base station and Express to extend the network reach, what selection do I choose in the Airport Setup Assistant screen to connect the Extreme - "Set up new Airport base station" or Change settings on an existing Airport base station"? I think the latter, but want to be sure.
Problem 3 - I want to establish a network so I can use email, share files between my G5 and laptop, etc but am not clear how to do so. Airport has the option "creat network", but I really don't know what this accomplishes. I'd realy like to bring my laptop somewhere and be able to access files that are on my G5.
So basicaly, HELLLPPP.
G5 and MacBook Pro   Mac OS X (10.4.5)  

Still flashes...hard reset didn't work...and last night I even went back to factory reset. I went to the Apple store (genius bar??) and they said to bring it in if I can't fix it. We shall see.
Re the network set up..I'm starting to get there, but I've hit a stopping point. I made sure my G5 will allow file sharing, and I can see that computer in my "network", but when I aatempt to connect it asks me "Connect to the file server [computer name]" and asks me for a password. Nothing I've tried works. I just get a dialogue box that says "Connection Failed: Unknown user, incorrect password, or login is disabled....."
Anyone know how to activate a login, if it is in fact disabled???
Thanks in advance.

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