Comment 1 for bug 2002868

Due to the security risk, we shouldn't automatically permit root login unless the user has explicitly asked for it. There are still use cases where you would set ssh_pwauth true while not wanting root login (i.e., creating new users later).

However, it doesn't look like there's any configuration at all to allow this currently and it makes sense for cloud-init to have that. I think the ability to "PermitRootLogin" and/or modify the sshd config more generally would be a good feature addition.