Just to be clear, user "baduser" is in group "users".I'm still testing. I'm not sure that this is a comment issue so much as the interpreter is just breaking due to something else. It seems to die after the "GatewayPorts no" line. Any additional configuration lines seem to cause the client to not authneticate. Debug output shows nothing; it just stops reading the config at that line.
There is something wrong, but I am not sure what it is.