ssh/telnet slowing down to a crawl while you're saturating the Wi-Fi with... Wi-Fi transfers makes perfect sense, FWIW.
It'd also be consistent with a system going OOM, which makes this a bit tricky to diagnose...
Enter USBNet! That way you'd get rid of the "is it Wi-Fi?" factor
.
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EDIT: Re-reading the message, a reboot would imply either nickel hangs because the system is OOM, tries to swap, but can't because there's no swap, and that makes nickel so slow that it trips sickel's watchdog and forces a reboot. (Or nickel gets OOM-killed, sickel detects that, and reboots).
So what does the kernel say, exactly? Running klogd first means you get a timestamped kernel log in your syslog: an OOM-kill would be visible there.
(Which, given the RAM usage you're describing, is most likely what's happening, as I can't imagine the Libra having more than the usual 512MB of RAM
).
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EDITē: It's 4AM, so I'm a bit slow ;p. Is nickel still alive and responsive and how's the RAM usage when you happen to check the syslog and stuff just breaks at the first book?