RSA Key Authentication using OPENSSH SFTP client to OPENSSH SFTP Server

I am trying to setup a file transfer between two windows boxes. It looks like SFTP is the right solution.
I installed the OPENSSH server on machine "A". I setup the users that I want. Then I installed the client on machine "B". These two machines are on different windows domains which is why I am using SFTP to move the files.

I can connect manaully using username and password without an issue. I used the open ssh key gen to generate an RSA key on the client using the right acoount. I added the pub key the .ssh folder on the host machine and appended the key the the authorized_key file as well.

I also configured my SSHD_CONFIG file as noted below.

When I try to connect it disconnects right away without an error. So I tried to connect again with  this connection line
sftp -v -oidentityfile=rsakey SERVERA

Here's the output
----------------------------------------------------------
C:\Program Files\OpenSSH\bin>sftp -v -oidentityfile=RSAKEY
SERVERA
Connecting to SERVERA...
OpenSSH_3.8.1p1, OpenSSL 0.9.7d 17 Mar 2004
debug1: Connecting to SERVERA [10.2.117.60] port 22.
debug1: Connection established.
debug1: identity file RSAKEY type 1
debug1: Remote protocol version 2.0, remote software version OpenSSH_3.8.1p1
debug1: match: OpenSSH_3.8.1p1 pat OpenSSH*
debug1: Enabling compatibility mode for protocol 2.0
debug1: Local version string SSH-2.0-OpenSSH_3.8.1p1
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 'SERVERA' is known and matches the RSA host key.
debug1: Found key in /home/backupops/.ssh/known_hosts:2
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

                            ****USAGE WARNING****

This is a private computer system. This computer system, including all
related equipment, networks, and network devices (specifically including
Internet access) are provided only for authorized use. This computer system
may be monitored for all lawful purposes, including to ensure that its use
is authorized, for management of the system, to facilitate protection against
unauthorized access, and to verify security procedures, survivability, and
operational security. Monitoring includes active attacks by authorized entities
to test or verify the security of this system. During monitoring, information
may be examined, recorded, copied and used for authorized purposes. All
information, including personal information, placed or sent over this system
may be monitored.

Use of this computer system, authorized or unauthorized, constitutes consent
to monitoring of this system. Unauthorized use may subject you to criminal
prosecution. Evidence of unauthorized use collected during monitoring may be
used for administrative, criminal, or other adverse action. Use of this system
constitutes consent to monitoring for these purposes.


debug1: Authentications that can continue: publickey,password,keyboard-interacti
ve
debug1: Next authentication method: publickey
debug1: Offering public key: RSAKEY
debug1: Server accepts key: pkalg ssh-rsa blen 149
debug1: read PEM private key done: type RSA
debug1: Authentication succeeded (publickey).
debug1: channel 0: new [client-session]
debug1: Entering interactive session.
debug1: Sending subsystem: sftp
debug1: client_input_channel_req: channel 0 rtype exit-status reply 0
debug1: channel 0: free: client-session, nchannels 1
debug1: Transferred: stdin 0, stdout 0, stderr 0 bytes in 0.5 seconds
debug1: Bytes per second: stdin 0.0, stdout 0.0, stderr 0.0
debug1: Exit status 255
Connection closed

Why can I connect with username and password and not RSA Key Authentication?

#	$OpenBSD: sshd_config,v 1.65 2003/08/28 12:54:34 markus 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 2,1
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
 
# The following setting overrides permission checks on host key files
# and directories. For security reasons set this to "yes" when running
# NT/W2K, NTFS and CYGWIN=ntsec.
StrictModes no
 
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 yes
# 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
 
# GSSAPI options
#GSSAPIAuthentication no
#GSSAPICleanupCreds 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'
#UsePAM yes
 
#AllowTcpForwarding yes
#GatewayPorts no
#X11Forwarding no
#X11DisplayOffset 10
#X11UseLocalhost yes
#PrintMotd yes
#PrintLastLog yes
#KeepAlive yes
#UseLogin no
UsePrivilegeSeparation no
#PermitUserEnvironment no
#Compression yes
#ClientAliveInterval 0
#ClientAliveCountMax 3
#UseDNS yes
#PidFile /var/run/sshd.pid
MaxStartups 10:30:60
 
# default banner path
Banner /etc/banner.txt
 
# override default of no subsystems
Subsystem	sftp	/usr/sbin/sftp-server

                                  

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