In my case it was due to an Intrusion Detection System
I have exactly the same problem. upgrade to 11.04 then ssh to the university I 
work won't work any more. both client and server say "connection reset by 
peer", limiting the cipher length have it work. Details ares here : 

http://schplurtz.free.fr/wiki/envrac/reseau-bizbiz-ssh

Solution :
The Intrusion Detection System detects one of the TCP packets as :

           Malformed Key exchange init Message - SSH protocol violation

and then it sends two reset packets to both the client and server. each
of them then says : "connection reset by peer"

The security man removed the rule on the IDS, and then ssh works again !
magic.

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https://bugs.launchpad.net/bugs/708493

Title:
  cannot login anymore: Read from socket failed: Connection reset by
  peer

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