Unfortunately, the error messages aren't very helpful. But your problem isn't coming from Git pack; the first error message is from OpenSSH, which was able to reach the remote server but not sign in:
Connection to SERVER closed by remote host.
This is not a password problem (which has a different error message) but could be a permissions problem (like a group that doesn't have proper permission, which I see occasionally on OSX) or an unrecognized account name (on some systems this reports with password problems) or a timeout. You might try signing in from the command line:
$ ssh username@servername
to discover what kind of problem you are having. You might also try repairing permissions; OS X seems particularly vulnerable to recurring permissions problems and to running from odd groups.
Sidenote -- since you're on Leopard, I suggest you install SSHKeychain, which manages SSH identities and will store your SSH passphrases in the system keychain automatically. It won't help your current problem, but might prevent similar problems in the future.