I am trying to pentest my WPS vulnerable wireless lan using BT5 r3 / Reaver running in VirtualBox 4.2.6 r82870 with a USB wireless dongle

Opening Wicd Network Manager in BT the dongle flashes away happily and I can see my network with good signal strength (90%).

I get:
lo        no wireless extensions.

wlan0     IEEE 802.11bgn  ESSID:off/any  
          Mode:Managed  Access Point: Not-Associated   Tx-Power=20 dBm   
          Retry  long limit:7   RTS thr:off   Fragment thr:off
          Encryption key:off
          Power Management:on
eth0      no wireless extensions.
It's in managed mode so I issue the following to get it into monitor mode:
ifconfig wlan0 down
iwconfig wlan0 mode monitor
ifconfig wlan0 up
iwconfig wlan0
wlan0     IEEE 802.11bgn  Mode:Monitor  Tx-Power=20 dBm   
              Retry  long limit:7   RTS thr:off   Fragment thr:off
              Power Management:on

Issuing command :
airmon-ng start wlan0
If airodump-ng, aireplay-ng or airtun-ng stops working after
     a short period of time, you may want to kill (some of) them!

     PID     Name
     571     dhclient3
     1760     dhclient3
     Process with PID 1760 (dhclient3) is running on interface wlan0

     Interface     Chipset          Driver

     wlan0          Ralink RT2870/3070     rt2800usb - [phy1]
                         (monitor mode enabled on mon0)
I kill the above processes (although tried also without killing them):
killall -9 dhclient
The problem I am experiencing occurs with:
airodump-ng wlan0
No networks show up even though I know they are there when confirmed previously with Wicd Manager before issuing above commands. The dongle does not show any light activity at this point and going into Wicd shows "No wireless networks found".

It's as if the dongle has stopped working all of a sudden.

I never had the problem when running BT from the live CD and was able to get a list of Wireless networks in airodump-ng without problem.

What am I doing wrong?