Why is the wireless connection between my MacBook and AirPort Express so unstable?
Something to try is to turn off IPv6 support in your networking preference control panel for wireless, and even for ethernet if you are hardwired.

Mine would drop connections randomly and I'd have to mess around and eventually would pull its power and let it restart to restore sanity. Then, I read somewhere it was a problem with IPv6 support, and turn it off on our Macs. Now it's very stable. 

I stopped using it for my wireless router, and now use it for AirTunes. Very seldom will it lag, and when it does it'll sync up again by itself. I really can't remember the last time it "weirded out" on me, even though some days I'll be playing music through it for most of the day.