sftp upload to Windows 2003 EFS directory fails (using public key authentication)

From: Klaus (mail4klaus_at_telus.net)
Date: 06/28/04 

Date: 27 Jun 2004 19:54:36 -0700

When I upload a file (via sftp client with public key authentication)
to a Windows 2003 EFS enalbed directory (where the upload local
account has modify rights assigned to the EFS directory) I get the
following Windows system event error log: Event ID 6032, Source EFS,
Description: EFS does not support encryptions over network sessions
established using the NTLM protocol.

The same sftp upload is successful if I use local account password
authenticaton instead of public key authentication.

File uploads using public key authentications are successful to non
encrypted directories.

This issue is reproducable using various sftp clients and server
products. I used the latest versions of Vshell and F-secure products
in my testing.

Any info or troubleshooting tips are appreciated.