The Scratch extension is not capable of programming the Arduino. Scratch needs to be connected through USB for the extension to work. The purpose of this extension is to extend Scratch projects to the physical world using littleBits or to introduce Arduino concepts with a programming language young students are familiar with.
I have not found a suitable “scratch like” program that allows you to program an Arduino. I actually started prototyping one just last week. It will be a rather large project, but it’s good to know that there is some interest for a block style Arduino IDE.