You need to change the option in /boot/grub/menu.lst to disable the splash screen, otherwise it will not allow you to ssh to the server

kernel /vmlinuz-2.6.24-19-generic root=/dev/mapper/sda4_crypt ro quiet splash

remove the "quiet splash" after the file system, or I changed mine to "ro quiet nosplash vga=790" I assume removing it works too

 That one option cost me about 1 1/2 hours because the system just boots up normal and it seems like you did something wrong, when actually it is working but GDM (I think) has started before the ssh server can so you have to enter in the password locally.