How best to install an Ethernet/AirPort combo on extended network TC?

I have replaced my 1st generation TC with a 4th generation model. While this swap worked, I am left with a few lingering questions.
1. I reconfigured the 1st generation TC to extend the AirPort network. However, when I plug an Ethernet cable input into the unit at the extended point, my wireless network goes ker-flooie. Why is this? (An output cable, standing alone from the TC, works fine; only the input causes difficulties. But I am, of course, with this configuration only extending AirPort, not the faster Ethernet network.)
2. In setting up my remote computer(s) should I choose "AirPort" or "AirPort 5Hz"?
My setup:
One Mac mini upstairs is attached to the new TC. No issues there.
Another Mac mini downstairs is attached via over-the-roof cabling to the TC via the home Ethernet system. No issues there either.
An iMac at a remote location finds the Internet through AirPort. It is in close proxmity to an AE that also extends the network. (This unit achieves faster response times after I connected an Ethernet cable between the AE and the unit, thereby creating two IP addresses at this point on the network.) That where the problem occurs whenever I connect the extended TC to the Ethernet.
I would like to use the three unpopulated Ethernet slots on the old (remote) TC extender to connect to a AV-based music and video system.

Connecting devices to "extend" using wireless only always imposes an overhead bandwidth penalty since the "extending" device must receive the wireless signal and then re-broadcast it.
By the time the extending device receives the wireless signal, the bandwith has usually fallen off quite a bit, since this occurs with distance and any obstructions in the signal path.
Let's say you have a pretty good wireless signal where the extending device is located, and of the 130 Mpbs bandwidth available near the router, maybe 80-90 Mbps is present at the extedning location. That is what gets "extended", plus there is always some loss as well.
Connecting using Ethernet is always the best option in terms of performance because the network bandwidth is preserved over Ethernet...up to 300+ feet with virtually no loss. That's the way any decent commercial network with multiple wireless access points would be designed.

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