Hi,
This is a question more related to the usage of the VM in virtualbox and not puppet itself.
The fact that you cannot copy from your host to the VM it's an issue with your ubuntu/virtualbox setup, not a problem with puppet.
The method of "select text, copy it, go to another place and attempt to paste it" is very windows like ;-)
If you want to do this the right way, use ssh-copy-id
ssh-copy-id -i ~/.ssh/id_rsa.pub remote-host
From what you write seems that you have little experience with linux and administering your system, so I would stay away from modifying sshd_config parameters.
Using ssh-copy-id should do what you need/want.
Now you have 2 options:
1. Undo all the changes you did to your VM and just use ssh-copy-id
2. Get a clean puppetlabs VM and use ssh-copy-id
cheers!
p.s.
Remember that netiquette mentions that when you write in CAPS it's the same as YELLING. And afaik you don't go asking for help yelling at people.