I followed the instructions i found via this board but located here http://sirlagz.net/2012/08/09/how-to-us ... er-part-1/
I ran in to trouble because the instructions call for specifying 'driver=nl80211' in the hostapd.conf file but this driver was not found on my system.. and after much googling around i came to the conclusion that if the device does not work with the nl80211 driver there is no way to use hostapd and my best course of action was to go out and buy a new dongle (preferably something made by belkin with a ralink chipset).
Not being one to give up too easily i thought i might look a little deeper, what i discovered is that its not the nl80211 a device needs to work with its the cfg80211 api, this page gives us an insight http://www.linuxwireless.org/en/develop ... n/cfg80211 i'm not going to pretend i understand the stuff about writing drivers but it did give me some hope. This page http://www.linuxwireless.org/en/users/Drivers lists wireless devices working in linux and if you look at the first column it gives you compatibility with cfg80211, as you can see nearly all of the listed realtek chipsets are listed as compatible.
I then went over to the realtek site http://www.realtek.com.tw/downloads/dow ... Down=false to see what they could provide and found they did indeed have a linux driver for my chipset, the kernel version didn't match but it seemed worth a try anyway. I got the driver and extracted, inside was a folder named wpa_supplicant_hostapd, which i thought had to be promising and so after little more drilling down and extracting compressed folders i had a folder named ~/RTL8188C_8192C_USB_linux_v3.4.4_4749.20121105/wpa_supplicant_hostapd/wpa_supplicant_hostapd-0.8/hostapd in this folder there was a makefile so i tried 'make' (this took ages) and 'make install' (this only seemed to copy 2 files to /usr/local/bin). I found a bunch of example .conf files in my extracted hostapd folder so to test i executed '/usr/local/bin/hostapd -dd ~/RTL8188C_8192C_USB_linux_v3.4.4_4749.20121105/wpa_supplicant_hostapd/wpa_supplicant_hostapd-0.8/hostapd/rtl_hostapd_2G.conf' and lo and behold it worked!!!
It is worth mentioning at this stage that before going though this journey of discovery i had tried the version of hostapd in my distros (raspbian) repository so i had an existing broken install of hostapd that would (fail to) start on boot, to get things rolling along i used apt to remove the broken install (it left the /etc/init.d/hostapd file intact) then copied the realtek version of hostapd from /usr/local/bin to /usr/sbin and my .conf file of choice to /etc/hostapd/hostapd.conf as these were the locations my startup scripts were already pointing to.
My raspberry now provides a fully functional stable access point everytime it starts

I write this in the hope that realtek will get some credit for taking the time to provide us with this software, my concern is that if people continue to say it doesn't work eventually it will not.