Yup DrakeO, thats what I concluded. Pull the source and compile against the 5.04 kernel. Compile the new driver into the old kernel Well, I was trying to avoid that...in the interest of time.
Well, here is what I ended up doing which worked like a charm...simply 'upgrade' to Xubuntu 8.04 which I knew would recognize the 300M adapter. The lightweight X Windows in Xubuntu offsets the heavier Gnome in Ubuntu so performance runs reasonably well on my Toughbook like before and the usb adapter hotplugs just fine.
Lesson-learned: sometimes its just easier to upgrade!