Sorry, the kernel errors I pasted above are irrelevant - my other (working) Prism card does this too when the card is asleep (i.e. not on an active network profile).
Yes, rolling back to 1.21 works. This is using the default wlan drivers, or installing the hostap ipkg. Although, admittedly, I always /did/ have problems connecting to WEP networks (I made earlier posts about this), but no issues at all connecting to non-WEP networks or running kismet.