Comment 25 for bug 659143

OK, so you did see the firmware load error with one kernel. I think what happened on the other was the same phenomenon as I described in bug 662389. Perhaps caused by rebooting instead of a cold start. There is no reason to believe those two almost identical kernels would behave differently with regard to the firmware loading bug.

Please do shutdown - start cycles (not just reboot) when testing wireless. I have reason to believe it does make a difference. It throws all test results into doubt if isn't done. Sorry for not mentioning this earlier.

Mind to give the compat wireless rt2800pci another try, with renaming the other and with shutdown - start? I think it might very well work. After all the driver is reported to work for others for your hardware (Chris in his bug 662288).
Best to recompile compat-wireless with debugging on before, so if it doesn't work you already have good logs to send with ubuntu-bug linux. And _do_ file your own report that way if it doesn't work.

If you also have a "hang on rt2800pci unload bug" (not just a "won't connect bug") then try working around that and then let's make a separate report for that.
There is another report of various hanging (on usb), with the workaround to use ifconcfig wlan0 down to avoid hanging.
http://rt2x00.serialmonkey.com/pipermail/users_rt2x00.serialmonkey.com/2010-December/002756.html

HTH