First off, thanks for taking the time to give me a hand, its most appreciated.
ok, I dumped the default install of openssh (4.0) and installed version 4.2p1-fc4.1
I still had the key located in ~/.ssh/authorized_keys and the private key on my windows box
After installing the new verison of openshh I figured what the hell and tried signing in. This time I didn't get the "server refused our key" I was greeted with "Authenticating with public key"
"Passphrase for key "
OK, so it works with the new version and a default config file so I tested it with my simplified config file and it works fine to.
Whatever was messed up was corrected by re-installing. Kinda sounds like windows