IPhone 3GS suddenly stopped working with wifi in only one location

This is the situation. I have an iPhone 3GS and it the wifi suddenly stopped working at my house (just with the iPhone).
I have an Airport express (latest generation) and a time capsule (1st generation). All of my devices (except a PC laptop which isn't much of an issue, and the iPhone) cannot connect to it. The devices I have are as follows: Apple TV, iPod Touch, iPad 2, the "new" iPad, a macintosh computer.
However, when I move the Airport express to my work location, and plug it into the ethernet there, the iPhone works totally fine. It seems like the issue is just at my house. The Time Capsule works intermittently sometimes; random devices cannot connect to the network sometimes. The airport express seemed to fix this problem. I have read that this problem is related to the operating system "Lion" but the network was working fine for months and months after I have upgraded to lion. Sometimes both devices cease to work, and there is no internet to any devices in my home.
The network is password protected, so that removes the possibility of neighbors connecting to the network. The name of the network contains spaces and "symbols" which I have heard is an issue for PC's trying to connect to networks. Both my home and my workplace are on the same internet provider.
My questions are:
Why does the airport express work with the iPhone at my workplace and not at my house?
How many devices can a 1st gen Time Capsule handle at once?
If I buy an airport extreme, will it fix this issue?
How can I fix this?
I have restarted the device several times (both the iPhone and Time Capsule) and it still didn't fix anything.

Using the delete all content and settings option is not restoring the iPhone. Using the delete all content and settings option does exactly that - all content and settings are securely deleted except for the firmware, which is not a restore.
If you do this followed by re-installing an app via the iTunes sync process, the app settings and any data created and stored by the app will be lost. 3rd party app settings and data created and stored by a 3rd party app is not stored with the app on your iPhone and is not stored with the app or synced with the app in your iTunes library on your computer.
3rd party app settings and data created and stored by a 3rd party app is stored separately from the app on your iPhone and is included with your iPhone's backup which is updated as the first step during the iTunes sync process.
Restoring an iPhone with iTunes completely erases the iPhone first followed by the firmware being re-installed. After the firmware is re-installed, you are prompted to restore your iPhone from your iPhone's backup, which is the default selection. The other selection available is as a new iPhone. After either one, this must be followed by a sync with iTunes. If you restore from your iPhone's backup followed by re-installing an app that stores data you need to access, the data will be restored with the app. If you restore as a new iPhone or not from your iPhone's backup followed by re-installng an app, the app settings and any data created and stored by the app will not be restored with the app since you didn't restore your iPhone from your iPhone's backup where this data is stored.
If you restore your iPhone with iTunes as a new iPhone or not from your iPhone's backup with no change, you can follow this by restoring your iPhone with iTunes from your iPhone's backup to recover the 3rd party app settings and the data created and stored by the app along with all other data included with your iPhone's backup.

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