URGENT--HPUX rsync errors -- HELP???

I am running HPUX 11i V1 and have installed rsync.  I need to sync two servers (Server1 and Server2) via ssh.  ssh works correctly between servers.

Command lines and results have been sanitized :-)

ssh version:

# ssh -V
OpenSSH_4.1, OpenSSL 0.9.7e 25 Oct 2004
HP-UX Secure Shell-A.04.00.000, HP-UX Secure Shell version

---------------------------------------------------
Server1 (source)

Server1 is runnng rsync --daemon.

# ps -ef | grep rsync
    root 26265 22887  2 09:16:55 pts/1     0:00 grep rsync
    root 24292     1  0 08:28:03 ?         0:00 /usr/local/bin/rsync --daemon

The rsyncd.conf file is as follows:  

# cat /etc/rsyncd.conf
 [myhome01]
              path = /home/users/myhome01
              comment = My Home Directory
---------------------------------------------------
Server2 (destination)

Server2 is running the following command:

/usr/local/bin/rsync -e ssh server1:myhome01 /home/users/myhome01
----------------------------------------------------

When I run the command on Server2 as root I get the following.

1. Prompts for a password (ssh??).
2. Errors with the following messages:

# /usr/local/bin/rsync -e ssh Server1:myhome01 /home/users/myhome01
Password:
sh: rsync:  not found.
rsync: connection unexpectedly closed (0 bytes received so far) [receiver]
rsync error: error in rsync protocol data stream (code 12) at io.c(420)

I re-ran the command with the "v" option to see what was happening.

# /usr/local/bin/rsync -ev ssh Server1:myhome01 /home/users/myhome01
rsync: link_stat "/ssh" failed: No such file or directory (2)
rsync: link_stat "/Server1:myhome01" failed: No such file or directory (2)
rsync error: some files could not be transferred (code 23) at main.c(789)

I need to get this running asap.

Thanks,

Craig