Had same problem. An Ubuntu 7.04 running in VMWare Fusion where
connecting from my mac was extermely slow. Neither of the two proposed
fixes works, however above fix for setting with setting a host name for
the client worked. In addition, I found that instead of inserting the
hostname of the client into /etc/hosts you can also add set the
following in the config:

UseDNS no

I'm not sure how this affects the security, but my virtual machine with
ubuntu is not online so it works for me.

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SSH with GSSAPIAuthentication option on SSH servers are very slow
https://bugs.launchpad.net/bugs/84899
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