Extending extending network using airport express I know that this has been discussed before but this is a slightly different scenario. 

I live in a very elongated apartment and the signal is very bad in one end. I have a D-Link 655 (or something close) and I want to extend my wireless network using a Airport Express and a "powerline" (Ethernet over main power cables).

So to make it clear, the D-Link 655 will be used as wifi access point in one end and I want to use the powerline to be able to use the airport express as an extender and repeater in the other end. 

Will this work provided the powerline provides a internet connection to the other end of the apartment?

Secondly, if all this works, using the Airport Express as an Airplay unit as well as an extender shouldn't be a problem right?
There shouldn't be any issue with using the Airport as an extender in that scenario.

Normally an Airport can only extend the wireless network by providing a bridge over Wifi between itself and another Airport (or Time Capsule)

Using an Airport as an extender with a non-Apple router requires you to connect the two using ethernet, usually with a physical cable however by using a powerline connection that will replace the physical cable with the Ethernet over powerline.

A few caveats, if you are using MAC address filtering on the ethernet interface of the devices, make sure you add the MAC addresses of the Powerline module connected to each as required.  Normally most routers only limit MAC address filtering to the Wifi interface, but there are some that will alow you to enable this on all interfaces.

Edit: There shoudn't be any issue with using the AirTunes functionality under this scenario either as well as it providing the required Wifi extension.