That doesn't make any sense to me. I presented this exact scenario when I called Linksys tech support and the tekkie said no problem ~60 feet from the WRT54G for the WAP54G
I configure the WAP while its connected to my WRT54G so that it is recognized as a part of my network (either as an actual WAP or in a repeater mode) then move it to the garage and plug it in. It should then be picked up as part of my wireless network and more local wireless connections can connect via the WAP in the garage.
I looked into the wireless extender, but there is an automatic 50% reduction from 54 to 26 megs right off the bat & it doesn't support WPA encryption.
I just don't understand why it didn't work for you.
Todd