Julie,
I like your reference to progressive discipline. If the dismissal is based on the employee's inability to do the job, you will at least have worked with them and talked with them in an attempt to improve their performance. If they are unable or unwilling to improve their performance, the dismissal will not come as a surprise. Then you will deliver the message in a factual, brief manner, preferrably with someone from HR in the room with you. They then can deal with the collection of keys, computer, etc.
It is never a plesant task to do but it is a small part of the responsibility of being a supervisor.
Pat