This sound is usually represented by "ey." The word mahfaeraak was likely created early in development when Bethesda didn't have the alphabet fully fleshed out yet. I can't explain, why they didn't later change it to mahfeyraak, but for our purposes, there is no reason to ever use "ae" instead of "ey."

The 35th rune= 'C' or 'AE'

I do believe that the 35th rune could have been "ae," but regardless of what it may have been, it is an obsolete rune and shouldn't be considered for use.