Got help over at the Ubuntu IRC. It appears that if you hover the mouse over Network Manager it will say something like: "Device not active(firmware missing)". From here you will know that two drivers are loaded at once, causing none to be used. You do this by first determining what driver you should be using by "lsusb"(I think) and then "sudo lsmod | grep rt28" to see that two are loaded.
Now you need to follow the guide Ralink RT2870 based USB Wireless N adapters (Ubuntu)
by Mark Greaves (PCNetSpec).
Got this to work on my Ubuntu 10.04 64-bit. I suppose not having firmware installed caused the problem. Also, you dont need to use ndiswrapper the drivers are loaded by default.