Comment 30 for bug 920749

No idea what is problem.
Today I perform tests with Ubuntu 8.10 (debuan based distro). Before to run tests LANG was removed from /etc/environment and /etc/default/locale. After modification last file left empty.
Test pass when sshd was run with and without privilege separation and for client - with and without pseudo tty-allocation (-t flag).

First time I see same output as you but it was my failure as I forgot to enable client to send locale variables to my remote host (SendEnv LC_* and SendEnv LANG on separate lines).

Also test was performed with invalid locale (LANG=TESTING ssh ...). In this case remove host warn that locale don't exists.