Everything I find relating to this is the "ssh-exchange-identification:" error. This doesn't happen for me. I get two lines:

Connection to localhost closed by remote host.
Connection to localhost closed.

ssh -v localhost spits out:

OpenSSH_5.8p1, OpenSSL 0.9.8r 8 Feb 2011
debug1: Reading configuration data /etc/ssh_config
debug1: Connecting to localhost [::1] port 22.
debug1: Connection established.
debug1: identity file /home/tim/.ssh/id_rsa type -1
debug1: identity file /home/tim/.ssh/id_rsa-cert type -1
debug1: identity file /home/tim/.ssh/id_dsa type -1
debug1: identity file /home/tim/.ssh/id_dsa-cert type -1
debug1: identity file /home/tim/.ssh/id_ecdsa type -1
debug1: identity file /home/tim/.ssh/id_ecdsa-cert type -1
debug1: Remote protocol version 2.0, remote software version OpenSSH_5.8
debug1: match: OpenSSH_5.8 pat OpenSSH*
debug1: Enabling compatibility mode for protocol 2.0
debug1: Local version string SSH-2.0-OpenSSH_5.8
debug1: SSH2_MSG_KEXINIT sent
debug1: SSH2_MSG_KEXINIT received
debug1: kex: server->client aes128-ctr hmac-md5 none
debug1: kex: client->server aes128-ctr hmac-md5 none
debug1: sending SSH2_MSG_KEX_ECDH_INIT
debug1: expecting SSH2_MSG_KEX_ECDH_REPLY
debug1: Server host key: ECDSA 64:e3:27:90:ef:48:93:21:38:ea:9b:0e:0b:07:b0:2a
debug1: Host 'localhost' is known and matches the ECDSA host key.
debug1: Found key in /home/tim/.ssh/known_hosts:1
debug1: ssh_ecdsa_verify: signature correct
debug1: SSH2_MSG_NEWKEYS sent
debug1: expecting SSH2_MSG_NEWKEYS
debug1: SSH2_MSG_NEWKEYS received
debug1: Roaming not allowed by server
debug1: SSH2_MSG_SERVICE_REQUEST sent
debug1: SSH2_MSG_SERVICE_ACCEPT received
debug1: Authentications that can continue: publickey,password,keyboard-interactive
debug1: Next authentication method: publickey
debug1: Trying private key: /home/tim/.ssh/id_rsa
debug1: Trying private key: /home/tim/.ssh/id_dsa
debug1: Trying private key: /home/tim/.ssh/id_ecdsa
debug1: Next authentication method: keyboard-interactive
debug1: Authentications that can continue: publickey,password,keyboard-interactive
debug1: Next authentication method: password
tim@localhost's password:
debug1: Authentication succeeded (password).
Authenticated to localhost ([::1]:22).
debug1: channel 0: new [client-session]
debug1: Requesting [email protected]
debug1: Entering interactive session.
debug1: channel 0: free: client-session, nchannels 1
Connection to localhost closed by remote host.
Connection to localhost closed.
Transferred: sent 2008, received 1376 bytes, in 0.0 seconds
Bytes per second: sent 64774.0, received 44387.0
debug1: Exit status -1

I'm really at wit's end here because I couldn't get Windows' remote shell to even work. I'm so sick of using VNC just to get to a shell. Plus Windows' shell sucks because there is nothing like screen. Thanks