I have not tried it myself but given that in the documentation for the WLSE it says it can set the feild Authentication Type and one of the options there is network eap and the authentication server and if you look in the AP documentation you will see that to set PEAP that is the field that needs to be enabled
Step 9 Select EAP Authentication under the server. The EAP Authentication checkbox designates the server as an authenticator for any EAP type, including LEAP, PEAP, EAP-TLS, EAP-SIM, and EAP-MD5.
Then it looks like you should be fine.
Sources
http://www.cisco.com/univercd/cc/td/doc/product/rtrmgmt/cwparent/cw_1105/wlse/1_3/user_gd/config.htm#xtocid9
http://www.cisco.com/univercd/cc/td/doc/product/wireless/airo_350/accsspts/ap350scg/ap350ch8.htm#1036420
