well, i dont think there is any problem due to kernel. as i saw, the same wpa_supplicant is working fine with the rt73 1.0.3.0 driver.
infact the rt73 1.0.4.0 driver alone is working fine for WPA-PSK. the problem starts when i used wpa_supplicant.

I don’t think the problem occurred due to kernel. Because the wpa_supplicant is working fine with rt73 1.0.3.3 driver. I already mentioned the same. In fact, the driver [1.0.4.0] works fine with WPA-PSK alone. The problem starts when I used wpa_supplicant with the driver 1.0.4.0. And the error is CiperErr 3, the error for key.

I guess I don't know what else to tell you. As I said, the googling I did wasn't definitive but a problem with the kernel configuration was the most common suggestion for the errors you posted. I know a lot has been changing with the linux wireless support stack and it could be that the newer rt73 drivers are changing to reflect the the new wireless stack. One of the things I've read is that the new wireless stack has built-in WPA support, so I suppose that wpa_supplicant may not be needed, at least not in its current form, with the new stack.

So pretty much you can either use the older rt73 driver and wpa_supplicant or the newer driver and its inbuilt WPA support.

WPA supplicant will still be needed with the 'new' mac80211 stack.

For EAP we need WPA_Supplicant. The rt73 driver does not support EAP.

I'd be very surprised if RT73 did not handle EAP. 802.1x is part of the WPA implementation and it clearly does work with WPA, you problems with a specific version notwithstanding. I was using EAP-TLS with old Prism and ORiNOCO cards in the early days.

What are you using for a RADIUS server? Which EAP do you need? TLS? PEAP? TTLS? When did EAP come into the discussion? If you aren't able to get wpa_supplicant working, XSupplicant is a fine option.