OpenSSH 3.7.1p1
OpenSSH 3.7.1p1 was released today. It patches a potential security flaw. There are some allegations that there is actually an exploit, but the experts seem to view this as unlikely. No matter, I don’t mess around when it comes to Security.
I downloaded the source (be sure to check the PGP signature!) and compiled. It compiled just fine under MacOSX 10.2.6. But, after installation, the daemon kept dying whenever a client connected, because of some funny business with setuid(). Not wanting to mess around, I grabbed uidswap.c (not a part of the code affected by this vulnerability) from 3.6.1p1 and recompiled. It worked fine after that.
Update (9/17/2003): Despite some back-and-forth with Darren Tucker on openssh-unix-dev, we were unable to resolve this. So, until Apple comes along and releases a binary, MacOSX users should use the previous version of uidswap.c when compiling OpenSSH 3.7.1p1.
Update (9/18/2003): There’s now a patch to configure.ac which fixes the issue for MacOSX.
Update (9/22/2003): MacOSX 10.2.8 was just released, which deals with various security issues , including this one and the Sendmail issue mentioned above. And it “only” took a week! (N.B. the update does not include OpenSSH 3.7.1. Apple just applied a patch to version 3.4. While this fixes the immediate problem, there is a long list of reasons why you shouldn’t be running an outdated version of critical security software.)
Update (9/23/2003): The patch mentioned in the comments is no longer necessary. This, and several other more minor bugs were fixed in OpenSSH 3.7.1p2. Compile and Enjoy!

Re: OpenSSH 3.7.1p1
If you #define BROKEN_SETREUID and BROKEN_SETREGID in config.h, the problem goes away.