(I'm using the pcmcia card as opposed to a usb)

You are right, my device is USB. Sorry I missed the fact that yours is not. The initialization worked fine for mine with Knoppix 3.2 and 3.3.

root@hazie:~# ifconfig wlan0 192.168.0.1

(The IP address of my AP)

I find this IP a little strange. What do you mean your AP IP? It should be your PC's assigned IP. I was expecting something like 192.168.1.100 or 192.168.1.101 if it was your second PC connecting through your wireless router.

When you go to your router address (usually 192.168.1.1), what do you see in the DHCP client table?