SSH doesn't connect when SFTP is enabled

[Shft]

System:
Ubuntu 9.04
OpenSSH 5.1p1

I recently set up SFTP on my server and in doing so wanted to create a jail for users. I went through the steps and edited the sshd_config accordingly and got everything to work perfectly. However since doing so I can no longer ssh to that machine as I once was able to do. SFTP and the jail work fine however if I comment out ChrootDirectory /home/%u and ForceCommand internal-sftp in the sshd_config; I can now ssh to that machine however the jail no longer works. I need to be able to have the jail working properly for SFTP along with being able to ssh to that machine. Is this possible? Thanks in advance for any help.

sshd_config: Jail works for SFTP but no ssh

# Package generated configuration file
# See the sshd( manpage for details

# What ports, IPs and protocols we listen for
Port 22
# Use these options to restrict which interfaces/protocols sshd will bind to
#ListenAddress ::
#ListenAddress 0.0.0.0
Protocol 2
# HostKeys for protocol version 2
HostKey /etc/ssh/ssh_host_rsa_key
HostKey /etc/ssh/ssh_host_dsa_key
#Privilege Separation is turned on for security
UsePrivilegeSeparation yes

# Lifetime and size of ephemeral version 1 server key
KeyRegenerationInterval 3600
ServerKeyBits 768

# Logging
SyslogFacility AUTH
LogLevel DEBUG

# Authentication:
LoginGraceTime 120
PermitRootLogin yes
StrictModes yes

RSAAuthentication yes
PubkeyAuthentication yes
#AuthorizedKeysFile %h/.ssh/authorized_keys

# Don't read the user's ~/.rhosts and ~/.shosts files
IgnoreRhosts yes
# For this to work you will also need host keys in /etc/ssh_known_hosts
RhostsRSAAuthentication no
# similar for protocol version 2
HostbasedAuthentication no
# Uncomment if you don't trust ~/.ssh/known_hosts for RhostsRSAAuthentication
#IgnoreUserKnownHosts yes

# To enable empty passwords, change to yes (NOT RECOMMENDED)
PermitEmptyPasswords no

# Change to yes to enable challenge-response passwords (beware issues with
# some PAM modules and threads)
ChallengeResponseAuthentication no

# Change to no to disable tunnelled clear text passwords
#PasswordAuthentication yes

# Kerberos options
#KerberosAuthentication no
#KerberosGetAFSToken no
#KerberosOrLocalPasswd yes
#KerberosTicketCleanup yes

# GSSAPI options
#GSSAPIAuthentication no
#GSSAPICleanupCredentials yes

X11Forwarding yes
X11DisplayOffset 10
PrintMotd no
PrintLastLog yes
TCPKeepAlive yes
#UseLogin no

#MaxStartups 10:30:60
#Banner /etc/issue.net

# Allow client to pass locale environment variables
AcceptEnv LANG LC_*

#Subsystem sftp /usr/lib/openssh/sftp-server
Subsystem sftp internal-sftp

Match Group sftponly
ChrootDirectory /home/%u
X11Forwarding no
AllowTcpForwarding no
ForceCommand internal-sftp

#UsePAM yes



sshd_config: I can sftp to the machine but Jail does not work. I can also ssh to that machine.

# Package generated configuration file
# See the sshd( manpage for details

# What ports, IPs and protocols we listen for
Port 22
# Use these options to restrict which interfaces/protocols sshd will bind to
#ListenAddress ::
#ListenAddress 0.0.0.0
Protocol 2
# HostKeys for protocol version 2
HostKey /etc/ssh/ssh_host_rsa_key
HostKey /etc/ssh/ssh_host_dsa_key
#Privilege Separation is turned on for security
UsePrivilegeSeparation yes

# Lifetime and size of ephemeral version 1 server key
KeyRegenerationInterval 3600
ServerKeyBits 768

# Logging
SyslogFacility AUTH
LogLevel DEBUG

# Authentication:
LoginGraceTime 120
PermitRootLogin yes
StrictModes yes

RSAAuthentication yes
PubkeyAuthentication yes
#AuthorizedKeysFile %h/.ssh/authorized_keys

# Don't read the user's ~/.rhosts and ~/.shosts files
IgnoreRhosts yes
# For this to work you will also need host keys in /etc/ssh_known_hosts
RhostsRSAAuthentication no
# similar for protocol version 2
HostbasedAuthentication no
# Uncomment if you don't trust ~/.ssh/known_hosts for RhostsRSAAuthentication
#IgnoreUserKnownHosts yes

# To enable empty passwords, change to yes (NOT RECOMMENDED)
PermitEmptyPasswords no

# Change to yes to enable challenge-response passwords (beware issues with
# some PAM modules and threads)
ChallengeResponseAuthentication no

# Change to no to disable tunnelled clear text passwords
#PasswordAuthentication yes

# Kerberos options
#KerberosAuthentication no
#KerberosGetAFSToken no
#KerberosOrLocalPasswd yes
#KerberosTicketCleanup yes

# GSSAPI options
#GSSAPIAuthentication no
#GSSAPICleanupCredentials yes

X11Forwarding yes
X11DisplayOffset 10
PrintMotd no
PrintLastLog yes
TCPKeepAlive yes
#UseLogin no

#MaxStartups 10:30:60
#Banner /etc/issue.net

# Allow client to pass locale environment variables
AcceptEnv LANG LC_*

#Subsystem sftp /usr/lib/openssh/sftp-server
Subsystem sftp internal-sftp

Match Group sftponly
#ChrootDirectory /home/%u
X11Forwarding no
AllowTcpForwarding no
#ForceCommand internal-sftp

#UsePAM yes

[Shft]

I ended up finding out what the problem was. The sshd_config is setup for chroot for all users in sftponly and I had the user I was trying to ssh with in the sftponly group. Once I removed it from the group, I was able to ssh without any problems and also use SFTP. Hope this helps someone out.