Setting Up TC as a Router / Creating or Replacing a Network.....Confused!!

Hi, I apologise in advance because (as you will tell) I'm not too clued up on the TC but have a few questions to get it up and running as a router.....
Our current set-up is as follows: One modem/router (Netgear) providing internet connection to one desktop through an ethernet cable and two laptops through the wireless network it creates. I'm trying to bring the Time Capsule into the equation....basically looking for it to speed up or replace the existing wireless network.
From what I understand I will never be able to replace the Netgear router entirely because it is also a modem and therefore is providing the physical internet connection (telephone wire connected to it etc)...so instead what would be the best thing to do? Would that be to connect a second network through the Time Capsule and have the laptops connect to that and the desktop connect to the old Netgear modem through the ethernet cable...?
If that is the case: I realise I need to have the old router connected to the TC via ethernet cable for set-up, but once it is all set-up and the second TC wireless network created....can I then remove the ethernet connection from the router to the TC, or does it need to be permanently connected to work?
I did have a go at getting it up and running, I believe there was some sort of conflict with the IP addresses (maybe somebody can clarify?) so I think I set it up in a way which meant the Netgear router and TC were in conflict with each other by trying to distribute the same IP addresses....? May be completely wrong there though!
Hope someone can shed some light and help, would be most appreciated.
Regards

Most of the time, just a simple slight position change can make all the difference in the signal quality ... especially if there is something impeding (Wi-Fi interference) it.
You are not limited to having the TC adjacent to the Netgear router, but you will be limited by what choices will be available. Basically the TC & Netgear will be non-WDS compatible, and thus, you will not be able to extend the Netgear by wireless with the TC. That, of course, would leave you with Ethernet. However, in addition to a longer cable, you may want to consider using Powerline adapters. These adapters take advantage of your home's electrical circuit to create a pseudo Ethernet one. That way you could place the TC in another room where there may be less Wi-Fi interference present.
If this is not a viable option, then I would suggest trying different radio channels. By default, the TC will use the "Automatic" selection. The channel can easily be changed using the AirPort Utility.

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    So if someone is connected to the modem/router network they will be able to see the HD I will have put in to the AirPort Extreme?
    As I said above.....since the modem/router and AirPort are bridged, devices on the modem/router wireless will be able to "see" devices on the AirPort wireless, and vice versa.....
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    or will they still need the password needed to get onto the AirPort Extreme network?
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    Also, because it is bridged, I shouldn't have any problems accessing the HD I will have connected to the AirPort Extreme from an external location?
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