I came to the conclusion that this issue is related to ath5k driver with AR2413 wireless chip communicating with the Netgear WGR614 router via WPA2 protocol. The wireless chip here does matter, since I have another notebook (ubuntu 10.10, on 2.6.35* kernel, ath5k with a different chip though) that does not have the said problems.
Discovered that ssh and rsync also suffer from the throttled traffic when run wirelessly. In fact, rsyncing both from and to the affected machine stalls, as well as sshing to it. That only happens while on the wireless connection. We are talking about the aforementioned Netgear's LAN in all the cases.
I downloaded a 1 year old 2.6.35 kernel. It seemed to be better, however, sshing to the machine would also freeze in the middle of the session.
This is very weird taking good numbers from the connection speed test ( testmy.net ) into account makes it more weird.
Not sure what to do next. My nest suspicion would the combination the wireless card, router and the WAP2 authentication protocol. I will try turning the latter off and or trying other ones.
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