This helped:
Edit /etc/modprobe.d/blacklist and add this:
blacklist hostap
blacklist hostap_pci
blacklist hostap_cs

And if orinoco driver does not automatically load after start, add this to 
/etc/modules
orinoco_pci

Reboot and it works.

-- 
Cannot connect to encrypted wireless network using Prism 2.5 Wavelan Chipset
https://bugs.launchpad.net/bugs/293511
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