ssh Pubic key Authentication failure (10.3.9)

What I have done:
1. generated keys on my local machine [ssh-keygen -t dsa -b 1024]
-- no passphrase
-- permisions on ~/.ssh are drwx------
2. added the generated id_dsa.pub contents to the ~/.ssh/authorized_keys file of the remote computer (I also tried authorized_keys2)
3. made sure that ssh[d]_config had PubKeyAuthentication set to yes
3. setup ~/.ssh/config for the remote machine with the user ID for that host
Note: To date I've setup 8 other machines for public key authentication in ssh and scp.
results:
I always get asked for my passord.

debug info from ssh (names have been changed):

local:~ localUser$ ssh -v my.remote.com
OpenSSH_3.6.1p1+CAN-2004-0175, SSH protocols 1.5/2.0, OpenSSL 0x0090709f
debug1: Reading configuration data /Users/localUser/.ssh/config
debug1: Applying options for my.remote.com
debug1: Reading configuration data /etc/ssh_config
debug1: Rhosts Authentication disabled, originating port will not be trusted.
debug1: Connecting to my.remote.com [xx.xx.xx.xx] port 22.
debug1: Connection established.
debug1: identity file /Users/localUser/.ssh/identity type -1
debug1: identity file /Users/localUser/.ssh/id_rsa type -1
debug1: identity file /Users/localUser/.ssh/id_dsa type 2
debug1: Remote protocol version 2.0, remote software version OpenSSH_3.6.1p1+CAN-2004-0175
debug1: match: OpenSSH_3.6.1p1+CAN-2004-0175 pat OpenSSH*
debug1: Enabling compatibility mode for protocol 2.0
debug1: Local version string SSH-2.0-OpenSSH_3.6.1p1+CAN-2004-0175
debug1: Miscellaneous failure
No credentials cache found

debug1: Miscellaneous failure
No credentials cache found

debug1: SSH2 MSGKEXINIT sent
debug1: SSH2 MSGKEXINIT received
debug1: kex: server->client aes128-cbc hmac-md5 none
debug1: kex: client->server aes128-cbc hmac-md5 none
debug1: SSH2 MSG_KEX_DH_GEXREQUEST sent
debug1: expecting SSH2 MSG_KEX_DH_GEXGROUP
debug1: SSH2 MSG_KEX_DH_GEXINIT sent
debug1: expecting SSH2 MSG_KEX_DH_GEXREPLY
debug1: Host 'my.remote.com' is known and matches the RSA host key.
debug1: Found key in /Users/localUser/.ssh/known_hosts:2
debug1: ssh rsaverify: signature correct
debug1: SSH2 MSGNEWKEYS sent
debug1: expecting SSH2 MSGNEWKEYS
debug1: SSH2 MSGNEWKEYS received
debug1: SSH2 MSG_SERVICEREQUEST sent
debug1: SSH2 MSG_SERVICEACCEPT received
debug1: Authentications that can continue: gssapi,publickey,password,keyboard-interactive,hostbased
debug1: Next authentication method: gssapi
debug1: Server GSSAPI Error:
Miscellaneous failure
No such file or directory


debug1: Authentications that can continue: gssapi,publickey,password,keyboard-interactive,hostbased
debug1: Authentications that can continue: gssapi,publickey,password,keyboard-interactive,hostbased
debug1: Next authentication method: hostbased
debug1: No more client hostkeys for hostbased authentication.
debug1: Next authentication method: publickey
debug1: Trying private key: /Users/localUser/.ssh/identity
debug1: Trying private key: /Users/localUser/.ssh/id_rsa
debug1: Offering public key: /Users/localUser/.ssh/id_dsa
debug1: Authentications that can continue: gssapi,publickey,password,keyboard-interactive,hostbased
debug1: Next authentication method: keyboard-interactive
debug1: Authentications that can continue: gssapi,publickey,password,keyboard-interactive,hostbased
debug1: Next authentication method: password

XserverG5, connecting from iMacG5 Mac OS X (10.3.9)