Hostapd as router (no bridge interface)

For a while I have been using hostapd to bridge a wlan0 and eth0 interface and everything works grand. But now I want to do something more complicated

On another machine that this setup will eventually be running on I presently have an eth0 and eth1 interface and eth1 is connected to a spare wifi router (used as access point), traffic is routed between 2 different subnets and it works grand but I want to get rid of the spare wifi router and replace with a USB wifi dongle.

Trouble is hostapd doesn't like when you don't specify a bridge interface for it to use and I havn't had much luck convincing the wifi card to go into 'master' mode. Although everything works fine in 'ad hoc' mode.

In case anyone is wondering I'm trying to set up an open wifi network that doesn't let people arp spoof ethernet devices. I want to eventually run a transparent http proxy on it and maybe limit bandwidth as well.