I can confirm this issue in Gutsy Beta, too.
 If I try to connect, the whole system hangs and the computer needs a 
hardreboot.

lspci: 00:0d.0 Network controller: RaLink RT2561/RT61 rev B 802.11g

this happened in the 7.04, but it stopped to give error when the package
 linux-386.deb installed.

But in the 7.10  this does not solve nothing

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Ralink Wireless legacy drivers (rt2500 rt61 rt73 rt2570) USB/PCMCIA/PCI hangs PC
https://bugs.launchpad.net/bugs/34902
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