I think that the solution to Michael's problem is in line 6 of startup.m
if exist([persdir '\pathdef'],'file')
must be changed to
if exist([persdir '/pathdef'],'file')
for macs. Note the direction of the slash.
Also, for MATLAB R2010B running on mac OSX, I found that I had to go to my MATLAB install, do 'Show Package Contents', and under toolbox/local/ edit the pathdef.m file appropriately. The paths in that file seem to be added to all users automatically.
I am able to use SFTP functionality with password authentication, but not with public key authentication. Can some one confirm for me that this is indeed a limitation of the code, and not an error on my part? If so, are there plans to add this functionality?