RSA Authentication fails for localhost when not root - OK in 3.7 NOT_OK 3.8p1

[James Freeman]

In 3.7p1 you could, for a given user (say backup), generate an rsa_id key
pair, place the .pub key into /home/backup/.ssh/authorized_keys and then you
could ssh/scp localhost as the backup user and it worked as expected ie
automatically authenticated using RSA.

In 3.8p1 the behaviour has changed. For root you can do as described above
ie if you add roots .pub key to /root/.ssh/authorised_keys you can ssh
localhost as root and it will RSA authenticate.  For any other user RSA
authentication fails when you try to authenticate from/onto localhost.

Why this was relevant in my case was simple laziness. I have a backup widget
that takes a list of hosts to backup (including the real name of lacalhost)
and call scp which as of 3.8p1 barfs on the authentication. It is of course
trivial to bypass the scp for localhost.

I am wondering if I was using a bug/feature of 3.7p1 as the behaviour is now
different.

Regards

Dr James Freeman