You can only have one adsl modem connected to a phone line at a time, what you could have bought was a wireless access point, which could be attached to your network. or you could get a wireless usb network adaptor or such and then attach it to your current pc and then you would need to share the connection through windows.
This would mean that your machine upstairs would need to be switched on for the wireless connection to work.
but the easiest way is to just connect the router/modem where your current modem is. there may be a usb connection on the router/modem too, as quite a lot of them come with these.
M.