[FreeNX-kNX] FreeNX on Ubuntu "Permission denied (publickey, keyboard-interactive)"

[FreeNX-kNX at x11.cjb.net]

When trying to login to my NX server I always get the error:
"Permission denied (publickey,keyboard-interactive)"
It also says "server not install or NX access disabled"
I followed these steps [https://wiki.ubuntu.com/FreeNX] to install FreeNX.
The only thing I can figure is that the server is asking for a second password, but the client does not expect it to, so it times out (see below).
I am using the official nomachine client, and get the same results on a Windows and Linux box.
==connection log ==
root at axiom:~/.nx/temp/12844 # ssh nx at 127.0.0.1 -p 536
Password:
Linux axiom 2.6.10-5-386 #1 Tue Apr 5 12:12:40 UTC 2005 i686 GNU/Linux
The programs included with the Ubuntu system are free software;
the exact distribution terms for each program are described in the
individual files in /usr/share/doc/*/copyright.
Ubuntu comes with ABSOLUTELY NO WARRANTY, to the extent permitted by
applicable law.
HELLO NXSERVER - Version 1.4.0-03 OS (GPL)
NX> 105 --startsession
--startsession
NX> 105 startsession
startsession
NX> 105 startsession --session="Local" --type="unix-kde" --cache="8M" --images="32M" --cookie="5a3d0b8c882c371834d4ac7d3a3f5b55" --link="adsl" --kbtype="pc102/" --nodelay="1" --encryption="1" --backingstore="when_requested" --geometry="640x433" --media="0" --agent_server="" --agent_user="" --agent_password="" --agent_domain="" --screeninfo="640x433x8"
startsession --session="Local" --type="unix-kde" --cache="8M" --images="32M" --cookie="5a3d0b8c882c371834d4ac7d3a3f5b55" --link="adsl" --kbtype="pc102/" --nodelay="1" --encryption="1" --backingstore="when_requested" --geometry="640x433" --media="0" --agent_server="" --agent_user="" --agent_password="" --agent_domain="" --screeninfo="640x433x8"
NX> 105 SET SHELL_MODE SHE
SET SHELL_MODE SHELL
NX> 105 SET AUTH_MODE PASSWORD
SET AUTH_MODE PASSWORD
NX> 105 login
login
NX> 101 User: axiom
axiom
NX> 102 Password:
NX> 103 Welcome to: axiom user: axiom
NX> 105 listsession --user="axiom" --status="suspended,running" --geometry="
640x480x8" --type="unix-kde"
listsession --user="axiom" --status="suspended,running" --geometry="
NX> 127 Sessions list of user 'axiom'
Display Username Remote IP Session ID
------- --------------- --------------- --------------------------------
1000 axiom 127.0.0.1 C85AC5D0CE5BA0E300F930E3EF38B083
1000 axiom 127.0.0.1 DA8CA89D76D75D8356D157E411E9F324
1000 axiom 127.0.0.1 DC02635840693095309F997A8E5683DA
NX> 105 640x480x8" --type="unix-kde"
NX> 105 startsession --session="Local" --type="unix-kde" --cache="8M" --imag
es="32M" --cookie="5a3d0b8c882c371834d4ac7d3a3f5b55" --link="adsl" --kbtype=
"pc102/" --nodelay="1" --encryption="1" --backingstore="when_requested" --ge
ometry="640x433" --media="0" --agent_server="" --agent_user="" --agent_passw
ord="" --agent_domain="" --screeninfo="640x433x8"
startsession --session="Local" --type="unix-kde" --cache="8M" --imag
Password:
NX> 1000 NXNODE - Version 1.4.0-03 OS (GPL)
NX> 700 Session id: axiom-1000-CA1BC554BFA9D41B300B8AFA30A54787
NX> 705 Session display: 1000
NX> 703 Session type: unix-kde
NX> 701 Proxy cookie: 1fb965943315f923c61b53acbc12ee19
NX> 702 Proxy IP: 127.0.0.1
NX> 706 Agent cookie:
NX> 704 Session cache: unix-kde
NX> 707 SSL tunneling: 0
NX> 710 Session status: running
NX> 105 NX> 504 Session startup failed.
NX> 1004 Error: nxagent failed to start. Session timed out.
NX> 1001 Bye.

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