Resolution: When connecting to a trading partner's SSHFTP server, the most common Authentication Mode is "Password". "Public Key" and "Public Key and Password" are only used if the client has been issued a key pair to identify the client to the server. This is rare.
Use the "fetch from ssh server" hyperlink to get the server's public key and install it in BusinessConnect's certificate store. The Preferred Cipher, Preferred MAC, and Preferred Compression settings can be left at the default settings.