I think I have somewhat similar problem with setting up sshd. It must be
something stupid, but this has happened to me on two separate machines. As
it happens, someone else had initially set up cygwin on both of them, so I
don't know exactly what options were used (but I assume they are fairly
default). Another is NT4/SP6, the other is W2k/SP3, both use NTFS.
The problem: After I installed sshd with setup.exe, and run ssh-host-config,
I was unable to get the service running as SYSTEM user.
From event log, I found this:
User: NT AUTHORITY\SYSTEM
sshd : PID 528 : starting service `sshd' failed: execv: 255, error 255.
/etc/ssh* was owned by SYSTEM, but if I changed all that to owned by user, I
was able to run "sshd -d -D" from command line as user. Also If I changed
the service to be executed as user, it started up just fine.
I already used a fair amount of time trying to work out what might have been
the cause (and I'm somewhat satisfied with sshd service running as user) so
I'm taking the lazy attitude and asking here whether someone here has seen
something like this or able to tell off-hand whgat might be the culprit...