[Samsung Galaxy Nexus] beekay201:
well..

After seeing so many people having issues with something so trivial to me (i use ssh everyday much like yourselves), i decided to give it a go (i use good old fashioned usb cable and adb when i'm at home to get a prompt, i normally ssh from the phone not to it).

installed *checks phone notification bar again to see the name of the app* SSHDroid (free on the market), fired up xterm, 'ssh -p 22 root@myphones.local.wlan.ip', it says admin is the password for root, oh really, now that's great! typed it, even missed first login, typed again, logged in, works. i assume the rest also works.

valhalla% ssh -p 22 root@192.168.1.12
SSHDroid
Use 'root' on rooted devices otherwise any username works
Default password is 'admin'root@192.168.1.12's password:
Permission denied, please try again.
root@192.168.1.12's password:
root@android:/data/data/berserker.android.apps.sshdroid/home # uname -a
Linux localhost 3.0.8-cyanogenmod-25569-gc0a1566 #1 SMP PREEMPT Sat Jan 28 07:11:24 CET 2012 armv7l GNU/Linux
root@android:/data/data/berserker.android.apps.sshdroid/home # mount
rootfs / rootfs ro,relatime 0 0
tmpfs /dev tmpfs rw,nosuid,relatime,mode=755 0 0
devpts /dev/pts devpts rw,relatime,mode=600 0 0
proc /proc proc rw,relatime 0 0
sysfs /sys sysfs rw,relatime 0 0
none /acct cgroup rw,relatime,cpuacct 0 0
tmpfs /mnt/asec tmpfs rw,relatime,mode=755,gid=1000 0 0
tmpfs /mnt/obb tmpfs rw,relatime,mode=755,gid=1000 0 0
none /dev/cpuctl cgroup rw,relatime,cpu 0 0
/dev/block/platform/omap/omap_hsmmc.0/by-name/system /system ext4 ro,relatime,barrier=1,data=ordered 0 0
/dev/block/platform/omap/omap_hsmmc.0/by-name/userdata /data ext4 rw,nosuid,nodev,noatime,errors=panic,barrier=1,nomblk_io_submit,data=ordered 0 0
/dev/block/platform/omap/omap_hsmmc.0/by-name/cache /cache ext4 rw,nosuid,nodev,noatime,errors=panic,barrier=1,nomblk_io_submit,data=ordered 0 0
/dev/block/platform/omap/omap_hsmmc.0/by-name/efs /factory ext4 ro,relatime,barrier=1,data=ordered 0 0
/sys/kernel/debug /sys/kernel/debug debugfs rw,relatime 0 0
/dev/fuse /mnt/sdcard fuse rw,nosuid,nodev,relatime,user_id=1023,group_id=1023,default_permissions,allow_other 0 0
root@android:/data/data/berserker.android.apps.sshdroid/home # mount -o rw,remount /dev/block/platform/omap/omap_hsmmc.0/by-name/system /system
root@android:/data/data/berserker.android.apps.sshdroid/home # mount
rootfs / rootfs ro,relatime 0 0
tmpfs /dev tmpfs rw,nosuid,relatime,mode=755 0 0
devpts /dev/pts devpts rw,relatime,mode=600 0 0
proc /proc proc rw,relatime 0 0
sysfs /sys sysfs rw,relatime 0 0
none /acct cgroup rw,relatime,cpuacct 0 0
tmpfs /mnt/asec tmpfs rw,relatime,mode=755,gid=1000 0 0
tmpfs /mnt/obb tmpfs rw,relatime,mode=755,gid=1000 0 0
none /dev/cpuctl cgroup rw,relatime,cpu 0 0
/dev/block/platform/omap/omap_hsmmc.0/by-name/system /system ext4 rw,relatime,barrier=1,data=ordered 0 0
/dev/block/platform/omap/omap_hsmmc.0/by-name/userdata /data ext4 rw,nosuid,nodev,noatime,errors=panic,barrier=1,nomblk_io_submit,data=ordered 0 0
/dev/block/platform/omap/omap_hsmmc.0/by-name/cache /cache ext4 rw,nosuid,nodev,noatime,errors=panic,barrier=1,nomblk_io_submit,data=ordered 0 0
/dev/block/platform/omap/omap_hsmmc.0/by-name/efs /factory ext4 ro,relatime,barrier=1,data=ordered 0 0
/sys/kernel/debug /sys/kernel/debug debugfs rw,relatime 0 0
/dev/fuse /mnt/sdcard fuse rw,nosuid,nodev,relatime,user_id=1023,group_id=1023,default_permissions,allow_other 0 0
root@android:/data/data/berserker.android.apps.sshdroid/home #

root over ssh achieved quite easily.

you can see running kernel is 3.0.8, rom is cm9 self built kang.

edit: oh yeah, host os is linux 3.2.2

edit2: for those who are stating openssh is the problem, well maybe it's just your current installed version of openssh that has some issues. that's what i use, and it sure works.

valhalla% pacman -Qs openssh
local/openssh 5.9p1-5
Free version of the SSH connectivity tools