Keys are properly deployed in ~/.ssh/authorized_keys
Yet ssh keeps on prompting for a password.
I'd agree with the changes above working on most linux variants in the root account. I have had a problem with RedHat 6.3 with trying to get a postgres user account to use DSA auth. (6.3 running in VirtualBox)
The issue can be that the basic selinux permissions are wrong. Restorecon wont help in this case.
(After restorecon)
drwx------. postgres postgres unconfined_u:object_r:var_lib_t:s0 .ssh
I have fixed this with :
chcon -R -t ssh_home_t .ssh
This resolved this instance of the problem.