I have the same problem as well, cannot open documents due to the extra
password dialogue. Did a fresh install of Ubuntu 8.04 just to be able to
work remotely on my files, used Freenx before but the performance was
not enough for moving pictures in the documents.

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[upstream] [intrepid] gvfs-sftp: openoffice can't open or save files 
https://bugs.launchpad.net/bugs/234532
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