I consider this a really cheesy and hopefully very temporary workaround. It may not be recommended, use at your own risk, your universe may collapse into a black hole, etc., etc. But it worked. đ
If you still have a 10.7 install on another volume, you can copy the old sshd binary and missing libwrap library file to your 10.8 boot disk and run it. Quick and dirty run down (this is not detailed for those not versed in command line):
Pre) Make sure you stop the default sshd daemon via the sharing control panel. (Uncheck "Remote login.) Otherwise you will have a conflict on port 22 when you try to start the old.
1) Mount the 10.7 volume. For my example I'll call mine "Mac 10.7 HD"
2) sudo cp /Volumes/"Mac 10.7 HD"/usr/lib/libwrap.7.dylib /usr/lib/.
3) sudo cp /Volumes/"Mac 10.7 HD"/usr/sbin/sshd /usr/sbin/sshd2 (or "sshd-old" or whatever you like, just don't overwrite the exisitng sshd or you won't be able to revert later.)
4) sudo /usr/sbin/sshd2 (start the daemon)
Note you can't use the sharing control panel to control this version and if you wanted it start between reboots you would have to create a separate launchctl script for it.
Linc, another good lead, thanks. I probably should be spending my time looking around for alternatives than hacking away at my install. đ