I can confirm this bug: owner of /storage was id 1000 and the permission was 755. After fix owner and permission ssh without password works perfectly
I can confirm also. New libreelec installed from noob, and just updated to 7.0.3. The /storage is being set as a "normal user", which doesn't exist, by the installation. Fix with: chown root:root /storage ; chmod 0700 /storage
[hr]
There is no way that that can happen without user input
Nope. That's how some installation come -- probably isn't seen because so few people use ssh & set their keys & fight with it after the fail.