Ok as requested by lxp, I hereby report my findings on kismet with almost latest stuff.

PR1.2 firmware: flashed without using OTA method. eMMC remains stock.
kernel: 2.6.28.10power37. No other kernel hack patches added on.
wireless power management: off (disabled completely via wlancond with settings from one AP profile).

The issue seems to be with bluetooth co-existance. I originally had my bluetooth turned on but in hidden mode and the results from both kismet and airodump-ng only showed probes (along with autogroup probe under kismet) but no APs except when I physically raised the height of the n900 I was only able to pick up one or two (along with physically rotating n900). However whilst constantly on the move I was not able to pick up any APs only probes.

The issue was later solved by turning off bluetooth completely which resulted in perfectly working kismet along with airodump-ng.

Thanks again to lxp (lxp1 on #kismet at irc.freenode.net) for the help

(edit) It was interesting to note however, during bluetooth module being turned on and set to hidden mode, the wireless module device being in managed mode (not monitor mode), it was able to pick up far more APs with active probing. (/edit)