I just booted in 2.6.32-25-generic and see instant improvement.
None of the problem seen in 2.6.35-21-generic or 2.6.35-20-generic are present.

I did however notice the following error while booting
2.6.35-21-generic:

[   35.357754] phy0 -> rt2800pci_mcu_status: Error - MCU request failed,
no response from hardware

Could the problem be that the kernel for some reason fails to recognise
the hardware correctly and loads the wrong driver ?

Anyways, an easy work-around (as I used in Lucid too) seems simply to download 
another kernel and run off of that.
As mentioned I'm successfully using 
http://archive.ubuntu.com/ubuntu/pool/main/l/linux/linux-image-2.6.32-25-generic_2.6.32-25.43_i386.deb

-- 
[Maverick][2.6.35] RT2860 (ralink) support seems to be broken (it fails to 
connect to secured wireless networks)
https://bugs.launchpad.net/bugs/594866
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