I hope you mean you have an 802.11b radio in the AP1200 if you are testing with a 802.11b Client as there is NO compatability between A and B like there is with G and B As you said it was working with no WEP I assume you have dual radios
It sounds like you have a mismatch in WEP keys
This will give you the effect of layer 2 connection but no layer 3 therefore no DHCP or any other IP traffic
Re enter the WEP key on both the AP and the Client card making sure that you use the same key slot and the same entry method (HEX )
Also make sure that the same key length is selected and you entered 26 Hex characters for 128bit WEP