When you use PEAP authentication once you have authenticated via the radius server a dynamic key is then generated by the Radius server and handed back to the client. This key is then renewed after a certain period of time which is configurable by you.
This is much more secure than using a fixed key as the key will keep changing in addition to which it is a lot easier to manage ie. if your fixed key was compromised you would need to change it manually on the client computer.
Attached is a link to configuring WEP keys for the AP1230 with your version of IOS. The first pafrt is about configuring static WEP keys which you don't want. The second "Enabling Cipher Suites and WEP" is the one you are interested in.