Macfusion: Can't mount SSHFS directory, "Authentication has failed."
Mostly two things happen when key authentication is not working:


Your public key is not in the destination user's authorized_keys file
OpenSSH server is very picky when it comes to permissions:


The destination user's .ssh directory must belong to the destination user and needs 700 permissions. (drwx------)
The destination user's authorized_keys file within the .ssh directory  needs 600 permissions. (rw-------)



Additionally, take a look at the destination SSH server configuration:

...
#StrictModes yes
...
#RSAAuthentication yes
#PubkeyAuthentication yes
...
AuthorizedKeysFile      .ssh/authorized_keys
...
#PasswordAuthentication no
#PermitEmptyPasswords no
...


With these options set, it works on my side...