Comment 4 for bug 481297

Here is my session on Windows XP:

C:\Temp\4>bzr pull sftp://root@server/~/4
Connected (version 1.99, client OpenSSH_3.8.1p1)
SSH root@server password:
Authentication (password) successful!
Secsh channel 1 opened.
[chan 1] Opened sftp connection (server version 3)
+N bar/
All changes applied successfully.
Now on revision 2.

Corresponding part of .bzr.log:

0.250 bzr arguments: [u'pull', u'sftp://root@server/~/4']
0.297 looking for plugins in C:\work\Bazaar\plugins
0.563 looking for plugins in C:/Program Files/Bazaar/plugins
0.579 Plugin name rebase already loaded
0.672 encoding stdout as sys.stdout encoding 'cp866'
0.750 opening working tree 'C:/Temp/4'
2.516 falling back to default implementation
2.516 failed to load system host keys: [Errno 2] No such file or directory: 'C:\\Documents and Settings\\modul98/.ssh/known_hosts'
[ 2088] 2009-11-13 11:31:32.703 INFO: Connected (version 1.99, client OpenSSH_3.8.1p1)
3.063 Unable to look up default port for ssh
3.063 encoding stdout as sys.stdout encoding 'cp866'
[ 2088] 2009-11-13 11:31:37.015 INFO: Authentication (password) successful!
[ 2088] 2009-11-13 11:31:37.030 INFO: Secsh channel 1 opened.
[ 2088] 2009-11-13 11:31:37.078 INFO: [chan 1] Opened sftp connection (server version 3)
6.938 bzr-svn: using Subversion 1.5.6 ()
7.172 Using fetch logic to copy between KnitPackRepository('sftp://root@server/~/4/.bzr/repository/')(<RepositoryFormatKnitPack1>) and KnitPackRepository('file:///C:/Temp/4/.bzr/repository/')(<RepositoryFormatKnitPack1>)
7.172 fetch up to rev {root@server-20091113113224-242q9c9k3sqkv6ul}
[ 2088] 2009-11-13 11:31:37.640 INFO: +N bar/
[ 2088] 2009-11-13 11:31:37.655 INFO: All changes applied successfully.
7.500 return code 0

So my session looks almost the same as your, but we have different version of SSH on the server.

Mine: Connected (version 1.99, client OpenSSH_3.8.1p1)
Your: Connected (version 2.0, client OpenSSH_5.3)

I don't know is it related though.