ssh session hangs and then disconnects with "Exit status 66" right after accepting a password

[Leon Khaimovich <Leon dot Khaimovich at riverbed dot com>]

Hi, I have 1.5.25 version of Cygwin running on Vista SP1 in WinSrv2k8 domain. I've configured sshd and was connecting from other boxes with no problem. But it looks like when sshd runs as Windows service, there are problems with access to the console GUI. In the past I was able to work around them by starting sshd from a shortcut in the startup folder. Yet now the connection hangs and then disconnects with "Exit status 66" right after accepting a password.

In other words, I see the following sequence of events:

1. Configure sshd to start automatically in Services.msc window;
2. Logon into Windows as domain admin;
3. Do "ssh -vvv localhost" from Cygwin Bash Shell;
//Connection is established (see the attached log in ssh_localhost_-vvv_started_as_service.log).
4. Use Services.msc window for stopping sshd;
5. Do "/usr/sbin/sshd -ddd" from Cygwin Bash Shell;
6. Open another Cygwin Bash Shell and do "ssh -vvv localhost" from it;
//sshd accepts password, hangs and then disconnects with "Exit status 66."  See ssh_localhost_-vvv_started_for_debug.log and sshd_-d.log for more details. The place where sshd hangs is marked with *********hangs for ~2min*********.
7. If one again starts sshd as a service, one can connect to localhost just fine again.

The logs don't show any errors or problems as afar as I can see. On the client side (ssh -vvv localhost), there is just a clean disconnect after the hang-exactly like one would get after logging out. On the server side (sshd -ddd), one can see a disconnect signal received from the client (SIGCHLD) and the subsequent normal closing of the connection. I couldn't find any online info about "Exit status 66." 

So my first question is: "What makes the client to disconnect?" And, second, can one do something allowing Outlook's GUI to open when starting it via Cygwin's ssh connection, when sshd is running as a service?

Cygchek.out is attached.
Thank you,
--Leon.

Attachment: sshd_-d.log
Description: sshd_-d.log

Attachment: ssh_localhost_-vvv_started_as_service.log
Description: ssh_localhost_-vvv_started_as_service.log

Attachment: ssh_localhost_-vvv_started_for_debug.log
Description: ssh_localhost_-vvv_started_for_debug.log

Attachment: cygcheck.out
Description: cygcheck.out

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