The issue mentioned here is STILL occurring. About 1/5 SFTP connections fail with Untangle in the way. Take Untangle out of the picture and our system works 100%. The fact that it connects 4/5 times means this is not an ACL or some filtering problem. It is Untangle messing with the traffic somehow. Turning off all the racks doesn't help.
Server Summary:
Build: 7.3.1~svn20100616r26927release7.3-1lenny
Java: 1.6.0_12