Hostapd failed with USB WiFi dongle (RTL8188CUS 802.11n)

Do you have you wifi card on wlan1 interface?

Also, you can try driver + hostapd from Realtek website:

http://www.realtek.com.tw/downloads/downloadsView.aspx?Langid=1&PNid=21&PFid=48&Level=5&Conn=4&DownTypeID=3&GetDown=false&Downloads=true
It works for me.