In this instance it does act as a wireless router since you have your modem connected to it. It can also act as a range extender if you're using the Airport Base Station.
First all of all - Thanks for all your help so far.
I'm still having a fowarding problem. I'm trying to use Azureus Bit Tirrent client. It uses port 6881 as does most other bit torrent clients. I ahve created a rule in the firewall section and have gone into airport express adin and have used the port mapping utility to create a rule there as well where I have selected the ports to open. However my BT client still can't listen correctly and I am receiving a NAT error. If I plug my etherent directly into the Mac I get no problems so it is clearly something I am doing wrong with airport.
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