You got the thing backwards. It's not "too bad that sshd can't enforce keys"
of some property that happened to be missing in the key attackers got their
hands on. It's "too bad the HPC center staff didn't have tools good enough to
manage their servers". CFEngine and Puppet being two examples of such tools
the staff missed (or didn't know how to put into use in this case).
The problem, AFAIU, was that some user had a password-less key stored on some external system (their personal home computer, for all I know). That system was hacked, and allowed the attacker to access the HPC system. I don't see how the HPC center staff getting the Puppet-gospel could have prevented that person from using a password-less key. Well, except by disabling key-based logins (which, AFAIU, they could have used Puppet/cfengine/whatever for).
My point is that in general it would be better to disable password auth and only use key based auth, but only if you could somehow guarantee that the users wouldn't do crazy things like use password-less keys. But as you can't do that on the server-side, what other options do you have?
