I installed successfuly cwrsync server and the included opensshd on windows 2000. My goal was to use rsync over ssh with no password, I was following instructions I saw on another site on how to use ssh without password. Couldn't get it to work with the existing users in /etc/passwd.
Generating users file again (mkpasswd -l > /etc/passwd) made the opensshd unstartable, something like 'opensshd... %1 is not a valid Win32 application'.
I reinstalled opensshd and cwrsyncserver, but now I can't get any of them to work. I even (a little foolishly, I know) tried removing all the related register keys from openssh or rsync. Still can't get either service to work.
Sorry, I am not so sure ıf I can help you !! Try to uninstall everything and use service account´s private key to establish PKA based communication.
I've had the same problem on one of our servers - Win2003 server R1. The rsync service refused to start, and trying to run cygrunsrv manually came with the the %1 error. I tried reinstalling three times to no avail. Strangely running rsync --daemon .... worked fine.
No idea what the problem was in the end - rebooted the server and all is working fine (touch wood).