ssh openpty udev problems?

[Paul Reilly]

Hi,

I did a dist-upgrade from Breezy to Dapper. It all went smoothly
enough. I can now login, and do everything from console, but when
I try to login over ssh I get

Jun 12 07:12:31 ubuntu sshd[8562]: error: openpty: No such file or directory
Jun 12 07:12:31 ubuntu sshd[8565]: error: session_pty_req: session 0 alloc
failed

It seems udev may the cause?
I did a MAKEDEV pty and it created some in /etc/udev

But how does sshd know to look in /etc/udev ?
Should it not be looking in /dev/pts/*

Anybody experienced this same problem upgrading to dapper?
Any help appeciated.

Paul