Yes, the accounts has been tested on different boxes. As to your second point about the dns. I tried two different computers using the same gateway, xp and os x. The worked like like a charm. I'll probably just end up, upgrading ver of ssh and see how it goes.
user logging in remotely must have a valid shell to be able to do anything after they connect. If for example, as I normally do, give users invalid shells such as /bin/false...they could use ssh to connect, authenticate and get disconnected because they don't have a valid shell. Are you sure you have a valid shell?
Also - sometimes the initial connection will take some time as the sshd server will attempt to verify your hostname via dns
You shouldn't have to do any recompiling.
Craig