Ralink rt2070 USB wifi stick woes

[thelightguy]

Symptoms:
Keyboard stops working when Xorg is started while the USB wireless dongle is plugged in.
The following steps result in both the keyboard and the wireless dongle working until X is restarted:

1. Start X
2. unplug the wifi dongle
3. quit X
4. unplug the keyboard
5. re-plug the keyboard
6. start X
7. re-plug the dongle
8. run "sudo ifup wlan0" from xterm

Using the rt2800usb driver on the "Pisces" Raspbian image.

The keyboard, mouse, and wifi dongle are connected to a 7 port powered hub with a 3800ma (yes, almost 4 amps) power supply. The rpi is powered by a separate 700ma samsung-branded phone charger.

I've checked and the hub is indeed powering devices even when turned off. It provides enough juice through one port to spin up a 2.5" harddrive without connecting the second cheater plug, so it doesn't appear to be a power issue. I've tested the dongle on a PC running Lubuntu 12.04 and it functions normally.

[thelightguy]

More information:

After X is started the first time, the following is logged to the console intermittently until I unplug the keyboard, where [nn] is an incrementing two digit number.

usb 1-1.3.4.2: device descriptor read/64, error -32
usb 1-1.3.4.2: new low speed USB device number [nn] using dwc_otg

Occasionally the last step hangs xterm and the following is logged to the console repeatedly until the dongle is unplugged.

phy3 -> rt2x00usb_vendor_request: Error - Vendor Request 0x06 failed for offset 0x1004 with error -110.
phy3 -> rt2x00usb_vendor_request: Error - Vendor Request 0x06 failed for offset 0x1208 with error -110.