I've had this same problem.  Now trying Odiseo's solution (pointed out
by Ludwik) of building the rt2500 driver from source and blacklisting
the provided rt2500pci driver.  Seems to be working so far.  I hope I
never have to do another "sudo ifdown ra0 && sudo ifup ra0"  :P

I think this problem is quite severe.  It breaks network connectivity in
hardware that previously (in Feisty) worked.  It would be good if an
update could be released, but that seems at odds with itself, as it
requires the network (which times out with the provided driver).
Anyway, it would be great if a formal solution could be provided.

-- 
rt2500: network-manager fails to join wireless networks
https://bugs.launchpad.net/bugs/134962
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