Extending a mixed Time Capsule / Airport Extreme Network

DSL Router -> Airport Extreme -> WIFI -> Time Capsule

Time Capsule CAN join to an extended (WDS) Airport Extreme network just like any other Airport Extreme device, but manual setup often says "This network cannot be extended". The real problem is the discrepancy between the manual and automatic configuration options. So instead of manual setup, press continue (or 'assist me') and go over the functions. Just ignore the first 'ethernet is not connected' part.
Everything should work fine in this way.

Sometimes the time capsule backup will work only if the name of the device is short and alphanumeric only (no space or any special characters).