Public Key and VMware 5

We recently upgraded our student VMware ESXi lab from version 4.x to 5.x. Prior to the upgrade XShell 4 allowed us to log onto the remote hosts using a username/password. However, post upgrade XShell is forcing public key authentication on our students.

The password field is now grayed out and inaccessible. As a work around I've changed this to keyboard interactive. I have attached a screen shot for reference. Any thoughts?

Program Ver. : Xshell 4