Setting up SFTP between two HPUX servers

I am trying to setup an SFTP connection between two HPUX servers that authenticates using a public key.  I used the following command to geneerate the key pair and entered a passphrase:
ssh-keygen -t dsa -f test_key

Output:
Your identification has been saved in test_key.
Your public key has been saved in test_key.pub.
The key fingerprint is:
68:a2:60:e4:47:29:d6:0f:f4:98:8f:08:bc:24:6d:20 myuserid@serverA

I then copied the test_key.pub file to ~myuserid/.ssh on serverB and appended it to authorized_keys.
On serverA:
ls ~myuserid/.ssh
test_key
test_key.pub
known_hosts

On serverB:
ls ~myuserid/.ssh
test_key.pub
authorized_keys

From serverA I ranthe following command to connect to serverB using sftp:
sftp -v -oIdentityFile=~/.ssh/test_key myuserid@serverB

Output:
Connecting to serverB...
OpenSSH_3.9, OpenSSL 0.9.7d 17 Mar 2004
HP-UX Secure Shell-A.03.91.002, HP-UX Secure Shell version
debug1: Reading configuration data /opt/ssh/etc/ssh_config
debug1: Connecting to serverB [xxx.xx.xx.xxx] port 22.
debug1: Connection established.
debug1: identity file /usr/relids/myuserid/.ssh/test_key type 2
debug1: Remote protocol version 2.0, remote software version OpenSSH_3.9
debug1: match: OpenSSH_3.9 pat OpenSSH*
debug1: Enabling compatibility mode for protocol 2.0
debug1: Local version string SSH-2.0-OpenSSH_3.9
debug1: SSH2_MSG_KEXINIT sent
debug1: SSH2_MSG_KEXINIT received
debug1: kex: server->client aes128-cbc hmac-md5 none
debug1: kex: client->server aes128-cbc hmac-md5 none
debug1: SSH2_MSG_KEX_DH_GEX_REQUEST(1024<1024<8192) sent
debug1: expecting SSH2_MSG_KEX_DH_GEX_GROUP
debug1: SSH2_MSG_KEX_DH_GEX_INIT sent
debug1: expecting SSH2_MSG_KEX_DH_GEX_REPLY
debug1: Host 'serverB' is known and matches the RSA host key.
debug1: Found key in /usr/relids/myuserid/.ssh/known_hosts:1
debug1: ssh_rsa_verify: signature correct
debug1: SSH2_MSG_NEWKEYS sent
debug1: expecting SSH2_MSG_NEWKEYS
debug1: SSH2_MSG_NEWKEYS received
debug1: SSH2_MSG_SERVICE_REQUEST sent
debug1: SSH2_MSG_SERVICE_ACCEPT received
debug1: Authentications that can continue: publickey,password,keyboard-interactive
debug1: Next authentication method: publickey
debug1: Offering public key: /usr/relids/myuserid/.ssh/test_key
debug1: Authentications that can continue: publickey,password,keyboard-interactive
debug1: Next authentication method: keyboard-interactive
Password:  (I enter my password here)
debug1: Authentication succeeded (keyboard-interactive).
debug1: channel 0: new [client-session]
debug1: Entering interactive session.
debug1: channel 0: free: client-session, nchannels 1
debug1: fd 0 clearing O_NONBLOCK
debug1: fd 1 clearing O_NONBLOCK
Connection to serverB closed by remote host.
debug1: Transferred: stdin 0, stdout 0, stderr 45 bytes in 0.0 seconds
debug1: Bytes per second: stdin 0.0, stdout 0.0, stderr 1401.6
debug1: Exit status -1
Connection closed

Here is the output from the syslog on serverB:
serverB sshd[20819]: Authentication refused: bad ownership or modes for directory /usr/relids/myuserid/.ssh
serverB sshd[20819]: Accepted keyboard-interactive/pam for myuserid from xxx.xx.xx.xxx port 59109 ssh2

There are two problems here, first it prompts for a password and doesn't authenticate with the public key (this is my main problem).  Second, when I do type my password the connection is closed.  As I said earlier my goal is to connect using the public key to authenticate, however I am also interested as to why this connection is dropping.  My thought is I am missing something small and trivial but cannot figure out what it is, any help would be appreciated.

Thanks