I'm using jaunty i386 and I started to experience the same issue.

Everything was ok then I generated a keypair using ssh-keygen with a
non-empty passphrase. I copied it to my target machine's
.ssh/authorized_keys file and ssh command was able to log in (the
passphrase was asked in a window dialog).

After sometime I decided not to use a passphrase anymore. So I used ssh-
keygen with empty passphrase. This new key pair and all the subsequent
ones I created (with empty passphare or not) did not work, reporting
`Agent admitted failure to sign using the key', without even asking for
a passphrase.

After reboot, I didn't see the problem.

Repeating the process (setting up new key pairs), I happens again.

Then I found out a way to fix it without rebooting:

1. remove the key pair files from ~/.ssh directory.
2. ssh the remote machine (this is step is needed). Don't need to login, just 
wait for the password prompt.
3. generate a new key pair.

After setting the public key in the remote site, the problem goes away.

It seams that seahorse does not like the key pair being modified
externaly.

I am able to provide any more information as needed.

-- 
gnome-keyring-daemon returns Agent admitted failure to sign using the key.
https://bugs.launchpad.net/bugs/328127
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