Bellow is what I would get on my log:
Apr 7 00:04:13 coruscant sshd: Failed publickey for kenjiro from x.x.x.x port 32880 ssh2
I wasted more than 2 hours messing with my configs to no avail. Now that I was really tired and upset I decided to give a chance to google ;)
Here I found a discussion about the exact problem I was having. So, until openssh guys fix this problem, all I have to do is to edit /etc/ssh/sshd_config:
1- where you see this
2- you change to
Did you notice the "%h/"? Yes, that does the magic.
So, happy sshing for you too.