I wouldn't recommend HMACSHA1 for database password storage, but setting the Key to be the same as the password does weaken the usefulness of the Key in this purpose. The key is supposed to be secret and used to determine if the underlying hashed data has changed.
For passwords you should be using a SALT+Password combination to increase the security of HASH algorithms. I usually use a SALT that is unique to the user, but not the same as the password, such as the user number or initial registration IP address.
Also, keep in mind that SHA1 is no longer recommended as a hashing algorithm.
You can reference MSDN for a clearer understanding.
This property is the key for the keyed hash algorithm.
A Hash-based Message Authentication Code (HMAC) can be used to
determine whether a message sent over an insecure channel has been
tampered with, provided that the sender and receiver share a secret
key. The sender computes the hash value for the original data and
sends both the original data and the HMAC as a single message. The
receiver recomputes the hash value on the received message and checks
that the computed hash value matches the transmitted hash value.
HMAC can be used with any iterative cryptographic hash function, such
as MD5 or SHA-1, in combination with a secret shared key. The
cryptographic strength of HMAC depends on the properties of the
underlying hash function.
Any change to the data or the hash value results in a mismatch,
because knowledge of the secret key is required to change the message
and reproduce the correct hash value. Therefore, if the original and
computed hash values match, the message is authenticated.