I had exactly the same bug on my newly installed Gutsy machine. Just
fresh install and at every reboot I was asked for password to unlock
keyring to establish wireless connection. I spend few hours digging
solution and nothing helped. Finally I've found this page and WOW!!!!.
pam-keyring-tool provided by Troels Faber works also for me so thanks
for it!

IMHO it's very serious bug since it's impossible to setup Ubuntu 7.10 to
automatically login and connect to a wifi network upon reboot. This
should be fixed very quickly - just take a look at many web pages with
discussions how to enable this feature, which was working in Feisty but
is broken in Gutsy.

-- 
libpam-keyring broken on autologins
https://bugs.launchpad.net/bugs/137247
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