I feel for you. This thread is the story of my trip though key hell. Maybe it 
will help.
Yours seems a little different.

http://support.github.com/discussions/accounts/1121-key-file-permissions-will-not-stick




________________________________
From: Macsig <[email protected]>
To: GitHub <[email protected]>
Sent: Sat, November 27, 2010 9:45:10 PM
Subject: Re: Permission denied (publickey)

Hi Avery, thanks for your reply.

The permissions on id_rsa are me read & write, everyone no access.
Just in case I have executed chmod 700 id_rsa

but unfortunately the result is still the same.


Any other idea?

Thanks again and have a nice day

On Nov 26, 11:21 pm, Avery Pennarun <[email protected]> wrote:
> On Fri, Nov 26, 2010 at 7:26 PM, Macsig <[email protected]> wrote:
> > debug1: Server accepts key: pkalg ssh-rsa blen 277
>
> Nice.
>
> > debug1: PEM_read_PrivateKey failed
>
> Bad.
>
> Sounds like id_rsa (not id_rsa.pub) on the client side has permissions
> that prevent your user from reading the file.
>
> Avery

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