I have generated a keypair with ssh-keygen in Ubuntu 6.10. Both of them are
on my local PC in ~./ssh.

I have then pasted the content from id_rsa.pub to a file on the server
called 'authorized_keys' that is located in ~/.ssh. But each time I try to
login I still have to enter a password.

On the server I don't have write access to anything besides from my home dir
but I can read contents from other folders. Here is the content of
/etc/ssh/sshd_config:

# $OpenBSD: sshd_config,v 1.68 2003/12/29 16:39:50 millert Exp $

# This is the sshd server system-wide configuration file. See
# sshd_config(5) for more information.

# This sshd was compiled with PATH=/usr/bin:/bin:/usr/sbin:/sbin

# The strategy used for options in the default sshd_config shipped with
# OpenSSH is to specify options with their default value where
# possible, but leave them commented. Uncommented options change a
# default value.

#Port 22
Protocol 2
#ListenAddress 0.0.0.0
#ListenAddress ::

# HostKey for protocol version 1
#HostKey /etc/ssh/ssh_host_key
# HostKeys for protocol version 2
#HostKey /etc/ssh/ssh_host_rsa_key
#HostKey /etc/ssh/ssh_host_dsa_key

# Lifetime and size of ephemeral version 1 server key
#KeyRegenerationInterval 1h
#ServerKeyBits 768

# Logging
#obsoletes QuietMode and FascistLogging
#SyslogFacility AUTH
#LogLevel INFO

# Authentication:

#LoginGraceTime 2m
#PermitRootLogin yes
#StrictModes yes

#RSAAuthentication yes
#PubkeyAuthentication yes
#AuthorizedKeysFile .ssh/authorized_keys

# For this to work you will also need host keys in /etc/ssh/ssh_known_hosts
#RhostsRSAAuthentication no
# similar for protocol version 2
#HostbasedAuthentication no
# Change to yes if you don't trust ~/.ssh/known_hosts for
# RhostsRSAAuthentication and HostbasedAuthentication
#IgnoreUserKnownHosts no
# Don't read the user's ~/.rhosts and ~/.shosts files
#IgnoreRhosts yes

# To disable tunneled clear text passwords, change to no here!
#PasswordAuthentication yes
#PermitEmptyPasswords no

# Change to no to disable s/key passwords
#ChallengeResponseAuthentication yes

# Kerberos options
#KerberosAuthentication no
#KerberosOrLocalPasswd yes
#KerberosTicketCleanup yes
#KerberosGetAFSToken no

# GSSAPI options
#GSSAPIAuthentication no
#GSSAPICleanupCredentials yes

# Set this to 'yes' to enable PAM authentication (via challenge-response)
# and session processing. Depending on your PAM configuration, this may
# bypass the setting of 'PasswordAuthentication' and 'PermitEmptyPasswords'
# UsePAM yes

#AllowTcpForwarding yes
#GatewayPorts no
X11Forwarding yes
#X11DisplayOffset 10
X11UseLocalhost no
#PrintMotd yes
#PrintLastLog yes
#TCPKeepAlive yes
#UseLogin no
#UsePrivilegeSeparation yes
#PermitUserEnvironment no
#Compression yes
#ClientAliveInterval 0
#ClientAliveCountMax 3
#UseDNS yes
#PidFile /var/run/sshd.pid
#MaxStartups 10

# no default banner path
#Banner /some/path

# override default of no subsystems
Subsystem sftp /usr/lib/misc/sftp-server
HostKey /etc/ssh/ssh_host_dsa_key
HostKey /etc/ssh/ssh_host_key
ClientAliveInterval 60
ClientAliveInterval 60
PasswordAuthentication yes


Eventhough I don't have permission to change these options they might
provide some info on what is needed to make publickey authentication work.

Any help appreciated!