Does personal hotspot always use cellular data? If I have my iPhone connected to a wifi connection, then put it on personal hotspot, is the device I'm connecting to my iPhone with using cellular data bandwidth, or the wifi bandwidth? 

You'd think it's a silly thing. But I'm JUST out of range of a wifi signal with my laptop, so my plan is to put my phone in a window not too far from my desk, and use it almost as an extender.
Personal Hotspot mode detaches the device from any network and is intended to make all data flow to and from the cellular account. If you pulled the SIM card your plan just might work as a stunt to connect two laptops in the absence of another router, but it certainly won't extend an existing wireless network in the manner you describe.