Per Cisco:
Ideally, you should use WPA2 with AES. If you cannot get this to work, a satisfactory alternative is WPA with TKIP. WEP is no longer recommended.
The option of WPA2 with "TKIP or AES" allows you to run a mixed system: Those devices that can do WPA2 with AES will use that system, less advanced devices (such as PDA's) that can only do WPA will do WPA with TKIP.
If you are having trouble with WPA2 you should note the following:
1) make sure you have the latest driver for your wireless adapter
2) Windows XP requires a patch to run WPA2. Go to Microsoft Knowledge base, article ID=893357 and it will direct you to the patch.
Sadly, the patch is not part of the automatic Windows XP updates, so lots of people are missing the patch.
Another note, we use a combination of Dell and Toshiba units at work, with WPA2/LEAP or WPA2/TKIP&AES, and every Dell, PDA, IPhone, blah can connect pretty much in 20 seconds. Two "identical" Toshibas will radically vary, and about 50% of the time fail outright. We set up a WEP network for the Toshibas to solve the problem... which sucks for many reasons.