Airport express is not a router. it can be used as a repeater unit, but it's not a base station. You plug it in and can connect a printer (USB Device), sound source (mini jack) and ethernet cable to it to connect to another computer if you so require.
And just because your ISP provides your router, there's nothing to stop you using your own kit.
Also to note - airport express is wireless. Plug it in. Your mac sees it, you can stream data to it. Very simple, and nothing even remotely stupid about it.
Yeah, you're overthinking it. Treat the AirPort Express like a device to hook up your speakers to your network. Or, to put it another way, a way to make your speakers WiFi.
Yes I'm sure you could use the Airport Express in all the ways you mentioned, it makes sense and it is indeed an awesome device, but my point is that it's still a full-featured router, and if you're not using it as a router, you're wasting quite a lot of money.
So this is all okay, but now that Apple is taking this AirPlay thing to a new level, I would expect them to come out with something that's a bit like the Airport Express, but for the sole purpose of making any speakers you already own wireless. Imagine a small, Airport Express-like device, that is way cheaper, and would only have one or more stereo jacks in it. You would plug in your speakers, and there you go, super simple! No need to get an expensive Airport Express (it's not that expensive, but it is expensive if you only use it to get rid of one wire for the sake of comfort).