Using router "transparently" to extend network?

Hi, all... this is probably an ethernet networking question, rather than strictly a Snow Leopard question, but I'm hoping someone might know the answer...
I have a Cable Modem delivering the internet to my Time Capsule, which is providing a wireless network downstairs in my house. It doesn't reach well to the loft upstairs, where my kids have their computers, so I have used a pair of "powerline ethernet" plugs to carry the network upstairs, One is wired into the time capsule, and the one in the loft is connected to the "WAN" socket on my old Belkin 4-port wireless router. I've turned off the wireless, so it's just acting as an ethernet router.
If I plug the two computers in the loft into the router with its default settings, they can connect to the internet with no problem.
However, they can't see the printer, which is wirelessly connected to the network downstairs, nor can they share iTunes or anything like that.
The router upstairs is set up by default to have the IP address 192.168.2.1, with DHCP running, NAT and so on. The Time Capsule assigns IP addresses in the 10.0.0.x range.
I wonder whether the problem with the printer and iTunes shares is that the router and two machines upstairs are effectively on a separate small network.
Is it possible to set up the router so that it connects the two machines upstairs "transparently", so that the IP addresses are assigned by the Time Capsule, and they are both effectively on the SAME network as downstairs? If so, what modes/settings do I need to change on the router upstairs? If I turn off DHCP on the upstairs router, will the Time Capsule DHCP the upstairs computers, or will they just not get IP addresses and fail to be on any network at all? Do I leave DHCP on the router upstairs ON, but change the router's base IP address and assignment range to be within the range of the Time Capsule network?
As you can tell, I really don't know enough about Ethernet to solve this one myself - can any of you fine folk help me out?
best regards,
Matt

I believe what you may need to try is to configure the loft router for bridged networking rather than using it as a separate router. Your upstairs network, if I understand your setup properly, is no on the same network as the one downstairs. But if the loft router is using bridged networking then it should simply be on whatever is brought upstairs by the Powerline Ethernet device. But I'm still not sure this will work since I'm not knowledgeable of the possible limitations of powerline ethernet devices. You still may not be able to connect to the printer from the loft.
What you might try is to use the TC downstairs and the router upstairs both with their wireless transceivers turned on. Configure the TC to allow its network to be extended. Configure the loft router to extend or join an existing network. If the two routers can establish and maintain a wireless connection then you can omit the powerline devices altogether.
For additional information: What happens if you connect the loft computer directly to the powerline device? Can you then connect to the downstairs printer? If so, then you know that how you are using the loft router is the problem. If you can't connect to the printer then you know the problem is with the powerline devices.

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