Updated to 2.6.31-15-generic (karmic-proposed) and the E169 shows
connection in the network-manager. Was working alright at first update
yesterday night but today it is showing problems again. It shows as
connected through the network-manager but doesn't actually get connected
( I can't surf internet or either ping through terminal). Anyways i
found a work-around on ubuntu forums- establishing connection through
PPPD. The internet works correctly through it!

3G modem connected using only one terminal command (pppd).

$ sudo pppd ttyUSB0 460800 nodetach defaultroute noipdefault noauth lock
usepeerdns connect 'chat "" "at" "" "at" "OK" "at&f" "OK" "atz" "OK"
"at+cgdcont=1,'IP','gint.b-online.gr'" OK "atdt*99***1#" CONNECT' user
web password web

Link: http://ubuntuforums.org/showpost.php?p=7790046&postcount=54

-- 
Several Huawei USB dongle don't work with kernel 2.6.31-12.40 (2.6.31.1 update 
related)
https://bugs.launchpad.net/bugs/446146
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