It's a password. Sent in plain text. But because users pretend that it's stealthy they pretend that it's something else.
Yes, you can have your port-knocking be an OTP. But why? Why not just listen to an UDP port that takes this plain text password or OTP like a sane person? Why sniff SYN packets?
What exactly does port knocking add to this, except make it MUCH more probable that your raw-packet-sniffing-oh-so-coolness has a security hole than that your "open UDP socket, read packet, check for equality" has a security hole?
With IPv6 TCPMD5 (or TCP AO) becomes a much more interesting way to solve this.
* attacker can't do successfull bruteforce attemps at the same rate or at all
* attacker can't reliable intercept (MITM) traffic, as he does not what port is being used
* attacker can' launch sshd DoS attacks, as he does not know where does sshd listen at (at least he has to try 65000 x bigger space, this precludes a lot of time based attacks
I'm not sure how what you said is related to what I said.
Edited to add: I'm asking for a clue. Thanks in advance. :)
Suddenly your whole VPN infrastructure became an attack surface.
I don't quite understand why you're saying it adds nothing at all.
You're not defending against the attacker who is targeting you with this. You're defending against the attacker who is targeting "anyone who is trivially accessible."