I have tested rt61.ko from ralink (ifconfig freezes computer with these drivers on reboot) and rt61pci.ko (does nothing) none off them worked for me
I even tested Ubuntu Dapper F6 it comes with rt61.ko driver y just copied firmware to the firmware folder but when I activate the device and reboot my system it freezes.
Have you tried compiling the source from Ralinktech but not using the firmware files included in said source archive but offered as an extra download on ralinktech site? That works for me on a Thinkpad T23 with Gigabyte GN-WI01GS Mini-PCi card. With included firmware my system freezes like yours and with rt2x00 BETA it at least loaded the driver, found the AP but did nothing more, like others write in another thread about rt61, too. I run Kubuntu Breezy badger, gave Dapper a try but it was a lot more messy than BB on the laptop.
I actually use said setup for about two weeks now without trouble but I don't know if your card will act different. But you could give it a try.