How to setup the secure shell daemon on a Windows 2003 server

Note : This set of instructions has worked for me at our institution. You should read /usr/share/doc/Cygwin/openssh.README after installing cygwin and check the cygwin mailing list if you encounter problems.
Installing and Testing cygwin
Create the destination folder (C:\cygwin or D:\cygwin as appropriate). Default permissions will be for administrators and SYSTEM only. Add SERVER\Users with modify control to the list. These permissions will be inherited to the rest of the folder as it is populated.

Create a directory to locally store the cygwin packages e.g. C:\temp\cygwinarchive. Open a browser window to the following URL http://www.cygwin.com/setup.exe and save the installation file setup.exe to the archive directory just created (C:\temp\cygwinarchive in this example)
Double click on the downloaded cygwin setup program. The current version is 2.510.2.2 (February 3rd, 2006). Click 'Next' and answer the prompts :
Leave default "install from internet"
Install to root directory c:\cygwin
leave default "install for all users"
leave default text file type "unix / binary"
Set local package directory to c:\temp\cygwinarchive (the directory created in the previous step). This should be the default.
Leave the default "direct connection"
Select a mirror (any of the ones with starting with http://mirror in the name). The package list will be downloaded.
The 'Select Packages' window can be stretched. Click on the plus sign to expand the categories. Install at least the following list of packages.
From Admin, select all packages.
From Archive, select unzip and zip packages.
From Base, leave the default, select all packages.
From Doc, leave the default, man and 'cygwin doc' packages.
From Editors, select vim package.
From Net, select openssh (openssl will get checked automatically), rsync and tcp_wrappers packages.
When you've selected these packages, click 'Next'. The installation tells you which packages it is installing as it progresses.
Uncheck 'Create desktop icon'. Leave default 'Add to start menu'. Click 'Finish'.
A post install script runs a few final commands. Then you should see a message saying 'Installation complete'. Click 'OK'.
Edit C:\cygwin\cygwin.bat. Make sure it contains these lines - you will need to add the line setting the CYGWIN environment variable.
@echo off
set CYGWIN=binmode tty ntsec
C:
chdir \cygwin\bin

bash --login -i

Test cygwin to make sure it works. Start, Programs, Cygnus Solutions, Cygwin Bash Shell - should get a command window with a prompt saying 'Administrator@servername'. This is a bash shell and you can use unix or DOS / NT type commands e.g.
'ls /bin' to see the cygwin bin directory
'dir c:' to see the contents of the C: directory
Type "control d" or "logout" to exit the shell.

If you get a message saying 'cannot create /home/userid', run this command from the cygwin window "mkpasswd -l >/etc/passwd".

While you're in the cygwin shell window, run this command to change the mount prefix from "/cygdrive" to "/". You should logout and back in again after running this command in order to reset your PATH environment variable properly.
mount -s --change-cygdrive-prefix /
Also, create a home directory where you can place user startup files. The default location is the "Documents and Settings" folder. Creating a /home directory and using the -p switch to assign the home directory when adding a new user keeps all the cygwin files under the c:\cygwin directory.
mkdir -p /home
Installing the SSH daemon service
From a cygwin prompt (Start, All Programs, Cygwin ?), run ssh-host-config to create the service, set up the ssh host keys and create the sshd_config file in /etc/. Note that 2 local users are created, one called sshd to handle privilege separation and one that is required on Windows 2003 called sshd_server that runs the service in order to use public key authentication. You should see output like this:

$ ssh-host-config
Generating /etc/ssh_host_key
Generating /etc/ssh_host_rsa_key
Generating /etc/ssh_host_dsa_key
Overwrite existing /etc/ssh_config file? (yes/no) yes
Generating /etc/ssh_config file
Overwrite existing /etc/sshd_config file? (yes/no) yes
Privilege separation is set to yes by default since OpenSSH 3.3.
However, this requires a non-privileged account called 'sshd'.
For more info on privilege separation read
/usr/share/doc/openssh/README.privsep.

Should privilege separation be used? (yes/no) yes
Warning: The following function requires administrator privileges!
Should this script create a local user 'sshd' on this machine? (yes/no) yes
Generating /etc/sshd_config file
Added ssh to C:\WINDOWS\system32\drivers\etc\services

Warning: The following functions require administrator privileges!

Do you want to install sshd as service?
(Say "no" if it's already installed as service) (yes/no) yes

You appear to be running Windows 2003 Server or later. On 2003 and
later systems, it's not possible to use the LocalSystem account
if sshd should allow passwordless logon (e. g. public key authentication).
If you want to enable that functionality, it's required to create a new
account 'sshd_server' with special privileges, which is then used to run
the sshd service under.

Should this script create a new local account 'sshd_server' which has
the required privileges? (yes/no) yes

Please enter a password for new user 'sshd_server'. Please be sure that
this password matches the password rules given on your system.
Entering no password will exit the configuration. PASSWORD=xxxxxxx

User 'sshd_server' has been created with password 'xxxxxxxx'.
If you change the password, please keep in mind to change the password
for the sshd service, too.

Also keep in mind that the user sshd_server needs read permissions on all
users' .ssh/authorized_keys file to allow public key authentication for
these users!. (Re-)running ssh-user-config for each user will set the
required permissions correctly.


Which value should the environment variable CYGWIN have when
sshd starts? It's recommended to set at least "ntsec" to be
able to change user context without password.
Default is "ntsec". CYGWIN=binmode ntsec tty

The service has been installed under sshd_server account.
To start the service, call net start sshd' or cygrunsrv -S sshd'.

Host configuration finished. Have fun!

You can start the service from the services MMC panel, or using either of the commands listed above ("net start sshd" or "cygrunsrv -S sshd").
Generating public/private SSH keys for a user
If you need to generate ssh public and private keys for a user on this machine who will be uploading data or logging in to a remote machine, you will need to carry out this step. Sign on as the user who needs the keys created. They will automatically be in their home directory. Run ssh-user-config to setup the ssh keys. Create only an SSH2 RSA identity (use a null passphrase - just press return). Output should be similar to this :
cygwinadmin@HICKORY ~
$ ssh-user-config
Shall I create an SSH1 RSA identity file for you? (yes/no) no
Shall I create an SSH2 RSA identity file for you? (yes/no) (yes/no) yes
Generating /home/pswander/.ssh/id_rsa
Enter passphrase (empty for no passphrase):Press ENTER
Enter same passphrase again:Press ENTER
Do you want to use this identity to login to this machine? (yes/no) yes
Shall I create an SSH2 DSA identity file for you? (yes/no) (yes/no) no

Configuration finished. Have fun!
Update the file /home/userid/.ssh/authorized_keys with any public keys from other users who you wish to be able to connect to this user's account. Refer to this document for more information. Make sure each entry you add is all on one line.
Make sure the service is running (state 4 = running)
$ sc query sshd

SERVICE_NAME: sshd
TYPE : 10 WIN32_OWN_PROCESS
STATE : 4 RUNNING
(STOPPABLE, NOT_PAUSABLE, IGNORES_SHUTDOWN))
WIN32_EXIT_CODE : 0 (0x0)
SERVICE_EXIT_CODE : 0 (0x0)
CHECKPOINT : 0x0
WAIT_HINT : 0x0
Test the service from the cygwin prompt using "ssh -v localhost". You will get challenged with the new host key and will have to enter your password as you connect. You should see output like this:
The authenticity of host 'localhost (127.0.0.1)' can't be established.
RSA key fingerprint is 75:8a:67:20:0d:75:dd:06:64:04:d0:ac:23:c7:74:ba.
Are you sure you want to continue connecting (yes/no)? yes
Warning: Permanently added 'localhost' (RSA) to the list of known hosts.

The last line is:
You are successfully logged in to this server!!!

Test the service from a remote host. You can now update the authorized_keys file with the public key file from the user and host you want to connect from. Then test your connection from that host by issuing the command "ssh userid@servername dir c:\"
Adding and removing users from the passwd file
You can add domain or local users using the mkpasswd command. Test what would be added for a domain user with this command:
mkpasswd -d domain_name -u joeuser
You can add an ads domain user to the passwd file and give him a home directory in /home with this command:
mkpasswd -d ads -p /home -u kscully >>/etc/passwd
You can add local users using the -l switch instead of the -d switch. Be careful not to use the -d domain_name switch without specifying a user or you will get entries for ALL doamin users in the passwd file.
Users can be removed and both users and groups can be updated by starting a cygwin shell and using vi to edit the /etc/passwd and /etc/group files.
Restricting SSH access to specific servers
Working on a netsh script to restrict access to specific servers.

cygrunsrv --install sshd --path '/usr/sbin/sshd' --env 'PATH=/bin;/sbin' --env 'CYGWIN=ntsec tty' -a -D

Switching the user who runs the service
In a normal installation, the ssh-host-config script creates a local user called sshd_server under whose credentials the ssh daemon runs. This is fine for local shell access to the server and secure file transfers to and from the server, but it is not possible to access any network resources while the service is running under the local user account.

The solution is to run the service under a domain user account - one that has access to the shares or servers remote from the server running sshd. In order to switch the service to run under a different user, these steps must be carried out :

Open "Computer Management", open the Services tab, right click on the "Cygwin sshd" service and stop the service.
Right click on the "Cygwin sshd" service again and select properties. Under the 'Log On' tab, switch the name of the account the service is running from ".\sshd_server" to domain\userid, where domain and userid correspond to a userid with access to the resources you require in the domain. You will be prompted for this user's password.
Open Control Panel -> Administratice Tools -> Local Security Settings -> Local Policies. Then click on 'User Rights Assignment'. Make sure the domain user you specified in step one is in the list for these 4 rights :
Adjust memory quotas for a process
Create a token object
Log on as a service (already granted if you completed step 1)
Replace a process level token
Add the domain user to the local password file
mkpasswd -d domain -u userid >> /etc/passwd
Change to ownership of the files required by the sshd service owner. Open a cygwin bash session and run these commands for your userid
$ chown userid /var/log/sshd.log
$ chown -R userid /var/empty
$ chown userid /etc/ssh*
In the services tab again, right click on the 'Cygwin sshd' service and select 'start'. Check the event log for a successful start, or for errors in case the service does not start successfully.