I was FINALLY able to set up a jailed SFTP server. This basically has circumvented one of OpenSSH’s drawbacks as a secure protocol. Normally, a user accessing the server via SFTP can have full read-only access to the entire server. Needless to say, this can be a security risk (a major one at that). What this patch does is restricts a “sftp” user to its home directory and restricts access to SFTP only (i.e. no interactive SSH sessions).

Thanks to Mads Madsen and Minstrel for helping me set up a chroot-ed SFTP server running on Ubuntu 7.10
Check out the Ubuntu guide HERE

Minstrel’s original guide can be found HERE. This might be useful for anyone else running other flavors on *nix.