I don't remember the difference, but I have this setup. I think I have the Express joining the network and streaming iTunes to my stereo. Works fine. At the bottom of the iTunes window, set it to "Mutliple speakers". This will allow you to play through your stereo and your computer's speakers at the same time.
You would determine which device would be the gateway, which is the device that would connect directly to your cable/dsl modem. I would assume this would be the Time Capsule. The other device, i.e. AirPort Express, would then need to be setup in bridge mode since it is basically just allowing other devices to join the network setup by your Time Capsule.