Public key authentication not working when I do "ssh localhost"

[Naveen Narayanan <naveen dot 4688 at gmail dot com>]

I've been trying "ssh localhost" on cygwin (I use WIndows 7), but it
keeps asking for the password.

When I did "ssh -vvv localhost", I found out that the public key
authentications were not happening (or failing). Hence, it was asking
for the password.

debug1: Authentications that can continue:
publickey,password,keyboard-interactive
debug3: start over, passed a different list
publickey,password,keyboard-interactive
debug3: preferred publickey,keyboard-interactive,password
debug3: authmethod_lookup publickey
debug3: remaining preferred: keyboard-interactive,password
debug3: authmethod_is_enabled publickey
debug1: Next authentication method: publickey
debug1: Offering RSA public key: /home/navenara/.ssh/id_rsa
debug3: send_pubkey_test
debug2: we sent a publickey packet, wait for reply
debug1: Authentications that can continue:
publickey,password,keyboard-interactive

I'm not sure if it is unable to read the authorized_keys file, or if
there is a timeout issue with this, or did the authentication fail? Is
there any way to get more details?

I have done the following steps:

ssh-host-config. Answered yes to all.
Generated the RSA key and added it to the authorized_keys file.
net start sshd
ssh localhost

These are the permissions:

-rw------- 1 navenara mkgroup  402 May 18 16:34 authorized_keys
-rw------- 1 navenara mkgroup 1675 May 18 16:33 id_rsa
-rw-r--r-- 1 navenara mkgroup  402 May 18 16:33 id_rsa.pub
-rw-r--r-- 1 navenara mkgroup  171 May 18 14:33 known_hosts

There are a couple of issues as well: - The group is displayed as
mkgroup. - The user "navenara" does not exist in the localhost, I
guess. It was not displayed in "net user sshd". "navenara" is a Domain
account. Could this be causing the public key authentication issue?

Just to see if there is any difference in the output, I deleted the
authorized_keys file and tried. There was no difference in the output.
It still sends a packet and proceeds to the next mode of
authentication. There is no error message.

As of now, I do not know what happens when the packet is sent in my
case. I would be able to proceed further if I know what exactly the
problem is. Is there any way to get more details than what "ssh -vvv
localhost" provides? I'm very new to Cygwin and SSH.

Any help would be great.

Thanks!

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