Thanks for reporting and the workaround.
Is this still an issue in latest nm from hardy? Could someone try on intrepid, 
please?

** Changed in: network-manager (Ubuntu)
       Status: New => Incomplete

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[hardy]Network controller: RaLink RT2600 802.11 MIMO don't work with 
network-manager
https://bugs.launchpad.net/bugs/221970
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