What image are you using?

I've got the same problem with 20.04-live-server-amd64.iso
(https://releases.ubuntu.com/20.04/ubuntu-20.04-live-server-amd64.iso)

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https://bugs.launchpad.net/bugs/1887016

Title:
  Openssh default config has two PasswordAuthentication params

Status in openssh package in Ubuntu:
  Incomplete

Bug description:
  In Ubuntu server 20.04 the /etc/ssh/sshd_config file has an additional
  `PasswordAuthentication yes` string in the end.

  It can lead to security problems, because there's already one string
  `# PasswordAuthentication yes` in the beginning of the file. It is
  supposed to be uncommented if it's needed to change the default value.

  But if the user uncomments this string and set in to "no", it will be
  overriden by the last line of config.

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