The Apple Airport Express will only act as EITHER a WAP OR a media broadcaster without the Apple Airport Base Station.
I have a PowerBook G4, an Airport Express, and a Linksys Wireless Router. I currently have the Airport Express plugged into the router via an ethernet cable so that it can act as a functioning WAP as well as being able to broadcast from iTunes. However, if I unplug the Airport Express from the ethernet and put it in, say, the living room, so as to broadcast iTunes, I will have to choose between either my internet connectivity (the Linksys Router) or broadcasting over the Airport Express for playing music. The Airport Express, so far as I've seen, cannot act as a signal booster in conjunction with the Linksys Router (whilst unplugged from the Linksys Router via an ethernet cable), but it can act as a WAP by itself, and seems to have fairly decent reception.
In order for the Airport Express to retain the dual-functionality that you want, you'll need an Airport Base Station. Oh, how clever Apple is.