The 169.254.XX.XX adresses are obviously coming from computers not being able to communicate to the DHCP and get an IP address.
The VLAN configuration is ok, although I would start troubleshooting by connecting the 3 access points to the "rest of the network" (VLAN1) set of ports.
For the Wireless security you may safely rely on the Access Points' WPA encrytion. WEP is unsafe.