You are right that it is much better to connect them with an Ethernet cable and configure the second device as an Access Point, rather than Extender - this should fix the speed issues, as far as the Wi-Fi is concerned. You are also right to keep them on different non-overlapping channels (1-6-11 in the US).
If you keep the same SSID/pass, your clients will be able to connect to either. This usually works well, except, the only problem is you have to be almost out of range of the first AP for clients to connect to the other.
If you set them as different SSIDs/pass, then you can manually choose which one you want to connect to, losing the automatic switch-over from one to the other.
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