Your card may simply be one of many that has issues with wpasupplicant.
Take a look at bug 48473, and see if downgrading solves your problems.

Have you given this a try in edgy?

You can definitely associate through static and DHCP configuration in
/etc/network/interfaces. That is what is connecting you to the Internet
in the earlier cases, and not NetworkManager.

** Summary changed:

- NetworkManager say working wireless network broken
+ [dapper] NM unable to associate with Linksys USB Wireless Adapter.

-- 
[dapper] NM unable to associate with Linksys USB Wireless Adapter.
https://launchpad.net/bugs/48754

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