Hi,
I removed the '~' in the path. Following is the full log that is generated on using key authentication:
May 20, 2013 1:18:29 PM org.apache.sshd.server.session.ServerSession <init>
INFO: Session created...
May 20, 2013 1:18:29 PM org.apache.sshd.server.session.ServerSession readIdentification
INFO: Client version string: SSH-2.0-OpenSSH_5.9p1 Debian-5ubuntu1
May 20, 2013 1:18:29 PM org.apache.sshd.server.session.ServerSession handleMessage
INFO: Received SSH_MSG_KEXINIT
May 20, 2013 1:18:29 PM org.apache.sshd.server.kex.AbstractDHGServer next
INFO: Received SSH_MSG_KEXDH_INIT
May 20, 2013 1:18:29 PM org.apache.sshd.server.kex.AbstractDHGServer next
INFO: Send SSH_MSG_KEXDH_REPLY
May 20, 2013 1:18:29 PM org.apache.sshd.common.session.AbstractSession sendNewKeys
INFO: Send SSH_MSG_NEWKEYS
May 20, 2013 1:18:29 PM org.apache.sshd.server.session.ServerSession handleMessage
INFO: Received SSH_MSG_NEWKEYS
May 20, 2013 1:18:29 PM org.apache.sshd.server.session.ServerSession handleMessage
INFO: Received SSH_MSG_SERVICE_REQUEST 'ssh-userauth'
May 20, 2013 1:18:29 PM org.apache.sshd.server.session.ServerSession userAuth
INFO: Accepting user authentication request
May 20, 2013 1:18:29 PM org.apache.sshd.server.session.ServerSession userAuth
INFO: Authorized authentication methods: password
May 20, 2013 1:18:29 PM org.apache.sshd.server.session.ServerSession handleMessage
INFO: Received SSH_MSG_USERAUTH_REQUEST
May 20, 2013 1:18:29 PM org.apache.sshd.server.session.ServerSession userAuth
INFO: Authenticating user 'admin' with method 'none'
May 20, 2013 1:18:29 PM org.apache.sshd.server.session.ServerSession userAuth
INFO: Unsupported authentication method 'none'