this happened to me too. it seems that some folks found out that using the files from natetrue's sshify kit for 1.0.2 in addition to the programs in the new ssh kit worked. it did for me.
download this kit:
http://www.geocities.com/rianbattle/sshkit.zip
and try running the sshify-windows.bat file like it says in the tutorial. then, in iphoneinterface, run these commands
Code:
rmdir /System/Library/LaunchDaemons/com.apple.update.plist
rmdir /System/Library/LaunchDaemons/au.asn.ucc.matt.dropbear.plist
putfile /System/Library/LaunchDaemons/com.apple.update.plist
putfile /System/Library/LaunchDaemons/au.asn.ucc.matt.dropbear.plist
then reboot your phone again. after that, it should let you connect.