Different kinds of errors 

Bad file modes 

Symptom 

debug: Trying rhosts or /etc/hosts.equiv with RSA host authentication. debug: Remote: Bad file modes for /export/home/tong/.rhosts debug: Remote: Rhosts/hosts.equiv authentication refused: client user 'tong', server user 'tong', client host 'sunny.acadiau.ca'. debug: Server refused our rhosts authentication or host key. debug: Doing password authentication.

Conclusion / Solution 

It's ok that ~/.rhosts is a link, but make sure what it points to is owned by the user and mod is 600:

$ dir bin/tdat/.rhosts.iit
-rw-------    1 299      tong          265 Dec 14 23:49 bin/tdat/.rhosts.iit

Bonus (host key cannot be verified) 

Same error, but given by the client in iitrc while trying to auto-login

iitrc: Trying rhosts or /etc/hosts.equiv with RSA host authentication.
iitrc: Remote: Accepted by .shosts.
iitrc: Remote: Your host key cannot be verified: unknown or invalid host key.
iitrc: Server refused our rhosts authentication or host key.
iitrc: No agent.
iitrc: Trying RSA authentication with key 'tong@iitrc.acadiau.ca'
iitrc: Server refused our key.
iitrc: Doing password authentication.

After I fix the above problem, the auto-login also works.