Progress so far:
I replaced one of the startup scripts in /etc/rc.d/init.d with modified content and restarted the service from webppliance. The startup scripts are running under root so I was able to fix permissions on few select files in /etc and ~homedir/.ssh. Now ssh seems to be happy and thanks to most helpful folks here
I fixed permissions on most critical system files. There's still a few left and that I'll be fine-combing manualy.
This site is a great resource for Linux newbees, thanks guys