I have checked SFTP auth with password and key after requesting my dev ops to change server configuration and allow password auth for SFTP.
In both cases it works fine – app connects with server and then allow me to upload a website.
I got only one issue – the sync stopped at 0 operations, but the problem was caused by a wrong remote path in the server configuration. After fixing a path it was ok.
I suppose that your server is somehow incompatible with a SFTP library used in Publii or something is wrong with your server settings in Publii (but for me it looks correct).
Do you appreciate the support you've received today? If so, consider donating to the Publii team by clicking here; we'll be sure to use your donation to make Publii even better!