You have to suspend networkmanager, if you don't it will detect the drop in network connectivity caused by monitor mode, and then change back to managed mode, and reconnect.
My ipw2200 won't monitor anymore, it stopped working with airmon-ng around ubuntu release 7.04.
Looks like I lied, your command worked fine, I guess I shouldn't have been so lazy.
I would kill networkmanager, and try again.
sudo airmon-ng start eth1
Found 5 processes that could cause trouble.
If airodump-ng, aireplay-ng or airtun-ng stops working after
a short period of time, you may want to kill (some of) them!
Process with PID 3080 (dhclient) is running on interface eth1
Interface Chipset Driver
eth1 Intel 2200BG ipw2200 - [phy0]mon0: ERROR while getting interface flags: No such device
(monitor mode enabled on mon0)