That is true, but you wouldn't just auth against the radius server - you would enable the AP and radius server to use a form of EAP for port based (layer 2) security and encryption. This means that only 802.11x traffic is allowed to pass the AP, until the client authenticates. WEP keys are dynamically exchanged and TKIP/Broadcast WEP Key Rotation
can solve the WEP weaknesses (and there's always MIC). All traffic is always encrypted, if configured correctly (ie, setting a WEP key on each AP to make sure that multicast authentication traffic is encrypted etc).
Mind you that 'most' APs don't support such enterprise security features - Netgear have only just implemented such features on their upcoming products (business series). So many folks would have to make do with the cheaper alternative - VPN, if done correctly (using IPSec) it can be just as secure as the above methods.
I'm working on a e-smith/radius config atm:
http://www.naturalnetworks.net/mainPub/index_html?key=1051325574.84It's dodgy, but I've got it working resonably well with Cisco APs and Clients (both 34x and 35x, latest firmware). 1100's and 1200's won't be much different.