I am trying a different driver now: rt2870sta I've read a few reports this may be the 'proper' one to use. So far so good, no lag or anything and I did not have to set power off either.
Driver rtl2870sta is not the proper one to use. In fact, a patch to delete rt2860sta and rt2870sta from the kernel was queued yesterday, and they will be gone by the time 2.6.40 is released.
New firmware for rt2800usb was just accepted into the linux-firmware git tree. Please obtain a copy and try it.
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