> There is now a slight pause (approx 3-4 sec) after the password is
entered before ssh displays /etc/motd, is this due to the system
checking what is specified in the hosts: files dns line in
/etc/nsswitch.conf [?]

A delay *after* authentication is probably caused by your login shell's
startup sequence on the server side. For example, bash executes
/etc/profile, /etc/bash.bashrc, ~/.bash_login, ~/.profile, and ~/.bashrc
in order. You can trace how long each script takes to execute by adding
a line like e.g. »echo "/etc/profile"« to the bottom.

Anyway: To further cut down on delay *before* password authentication,
add "GSSAPIAuthentication no" to /etc/ssh/ssh_config on your client.
This will prevent SSH from requesting GSSAPI auth, which would fail
silently anyway because it is disabled by the default sshd_config
shipped in Ubuntu. (Except, of course, if you explicitly deployed
Kerberos.)

> looking back on it I specified the LoginGraceTime value based on a
Debian system hardening website/walk through ....thoughts?

One could imagine a Distributed Denial of Service attack where multiple
foreign hosts bombard the server with new connection attempts. This will
leave this server's CPU(s) commited to answering connection attempts
while doing little other work, exhaust the server's memory and file
descriptor resources, and overflow the session tables of any stateful
firewalls or NAT routers that happen to sit in front of the server.

Lowering LoginGraceTime will shorten the timeout until sshd closes an
unauthentified incoming connection. Lowering MaxStartups will limit the
maximum number of concurrent unauthentified connections. These two
settings will lessen the damage somewhat, though with a side effect:
Your incoming SSH connections won't be treated any differently,
effectively locking you out of your own system.

There's probably more to it, but these are my thougths :)

-- 
(bash) ssh to other systems fails to connect
https://bugs.launchpad.net/bugs/84849
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