To all posters who are having this precise issue: Wi-Fi works upon rebooting, and connects to the closest network, and will work for some time, HOWEVER it will sporadically lose connection and will no longer see ANY networks until rebooting again.
I Believe i know what is happening here: I think it is a problem with the wifi module running too hot, and shorting out or otherwise losing connection. I'm led to believe this because it looses bluetooth as well which is found on the same module!
Last night I restored iOS 5 (for the 3rd time) and of course it worked on first boot. I stayed connected to my router for about an hour, doing some light internet use (browsing internet, using the remote to control my Apple TV) HOWEVER as soon as I tried to do a Wi-Fi sync to iTunes, to copy over some podcasts, it quit. I tried turning wifi on and off and it just couldn't see the network at all.
When it does more intensive transfers OR if you get farther away from the router, the card boosts up power consumption, gets hot and shuts down. I can see no other solution.
Today at my office I rebooted my phone, immediately connected to my office wifi. It stayed connected 3 hrs, only delivering occasional email. I turned off wifi, came home, turned it back on and it connected immediately. I started a wifi sync and sure enough it quite within 5 min.
I'm quite sure this is a programming/hardware issue because i have absolutely NEVER had an issue until upgrading to iOS 5. I think they are sending too much power or something to the wifi/bluetooth module.
I'm hoping its not permanently frying the module!
Sad thing is, exact same thing happened to my 3G when iOS 4 came out!