This reminds me of the time (albeit my memory is hazy) of an issue of having to set `chattr -i` on .ssh files because even though I had the right chmod permissions SSH still would not read it. It was quite painful to figure out and I can't recall if I googled it or read it in the man pages.
I believe it was because I had done something funny with the home directory and the user didn't fully own it (I believe it was a home media server).
I guess apparently some SSH versions expect `chattr -i` or I guess the parent directory to be owned completely by the user (I have been meaning to look into this some day). Maybe it wasn't -i .. maybe it was +i?