There is a description of the problem I have stumbled across a while ago:
http://lists.debian.org/debian-user/.../msg02019.html
Basically, I wasn't able to establish the SSH connection even to localhost.

I've finally figured out what had caused the problem. I ran sshd in
debug mode and noticed
"setreuid 100: Resource temporarily unavailable". The sshd user id is
100 in debian.
It turned out that the setreuid(2) syscall has been failing for some reason.

I wrote a simple test program (http://epsmu.com/~kuvkir/setreuid.c) to
check that
and it appeared that setreuid is failing for this particular uid (100).
I'm not sure if it is a debian or an openssh specific issue,
but rather glibc (2.3.6-ds1-13) or maybe kernel (2.6.18-4-powerpc
debian) related
thing.

For now I has changed the sshd uid to another value and restared the ssh daemon
and it works fine now.

Thanks,
Kirill