chrooting user causes "connection closed" message when using sftp

First off I am a linux newbie so please don't assume much knowledge. I am using CentOS 5.8 (final) and using OpenSSH version 5.8p1.

I have made a user playwithbits and I am attempting to chroot them to the directory home/nginx/domains/playwithbits/public

I am using the following match statement in my sshd_config file:

Match group web-root-locked
         ChrootDirectory /home/nginx/domains/%u/public
         X11Forwarding no
         AllowTcpForwarding no
         ForceCommand /usr/libexec/openssh/sftp-server

# id playwithbits returns: uid=504(playwithbits) gid=504(playwithbits) groups=504(playwithbits),507(web-root-locked)

I have changed the user's home directory to: home/nginx/domains/playwithbits/public

Now when I attempt to sftp in with this user I instantly get the message: connection closed

Does anyone know what I am doing wrong?

Edit: Following advice from @Dennis Williamson I have connected in debug mode (I think... correct me if I'm wrong).

I have made a bit of progress by using chmod to set permissions recursively of all files in the directly to 700. Now I get the following messages when I attempt to log on (still connection refused):

Connection from [My ip address] port 38737
debug1: Client protocol version 2.0; client software version OpenSSH_5.6
debug1: match: OpenSSH_5.6 pat OpenSSH*
debug1: Enabling compatibility mode for protocol 2.0
debug1: Local version string SSH-2.0-OpenSSH_5.8
debug1: permanently_set_uid: 74/74
debug1: list_hostkey_types: ssh-rsa,ssh-dss
debug1: SSH2_MSG_KEXINIT sent
debug1: SSH2_MSG_KEXINIT received
debug1: kex: client->server aes128-ctr hmac-md5 none
debug1: kex: server->client aes128-ctr hmac-md5 none
debug1: SSH2_MSG_KEX_DH_GEX_REQUEST received
debug1: SSH2_MSG_KEX_DH_GEX_GROUP sent
debug1: expecting SSH2_MSG_KEX_DH_GEX_INIT
debug1: SSH2_MSG_KEX_DH_GEX_REPLY sent
debug1: SSH2_MSG_NEWKEYS sent
debug1: expecting SSH2_MSG_NEWKEYS
debug1: SSH2_MSG_NEWKEYS received
debug1: KEX done
debug1: userauth-request for user playwithbits service ssh-connection method none
debug1: attempt 0 failures 0
debug1: user playwithbits matched group list web-root-locked at line 91
debug1: PAM: initializing for "playwithbits"
debug1: PAM: setting PAM_RHOST to [My host info]
debug1: PAM: setting PAM_TTY to "ssh"
debug1: userauth-request for user playwithbits service ssh-connection method password
debug1: attempt 1 failures 0
debug1: PAM: password authentication accepted for playwithbits
debug1: do_pam_account: called
Accepted password for playwithbits from [My ip address] port 38737 ssh2
debug1: monitor_child_preauth: playwithbits has been authenticated by privileged process
debug1: SELinux support disabled
debug1: PAM: establishing credentials
User child is on pid 3942
debug1: PAM: establishing credentials
Changed root directory to "/home/nginx/domains/playwithbits/public"
debug1: permanently_set_uid: 504/504
debug1: Entering interactive session for SSH2.
debug1: server_init_dispatch_20
debug1: server_input_channel_open: ctype session rchan 0 win 2097152 max 32768
debug1: input_session_request
debug1: channel 0: new [server-session]
debug1: session_new: session 0
debug1: session_open: channel 0
debug1: session_open: session 0: link with channel 0
debug1: server_input_channel_open: confirm session
debug1: server_input_global_request: rtype [email protected] want_reply 0
debug1: server_input_channel_req: channel 0 request env reply 0
debug1: session_by_channel: session 0 channel 0
debug1: session_input_channel_req: session 0 req env
debug1: server_input_channel_req: channel 0 request subsystem reply 1
debug1: session_by_channel: session 0 channel 0
debug1: session_input_channel_req: session 0 req subsystem
subsystem request for sftp by user playwithbits
debug1: subsystem: cannot stat /usr/libexec/openssh/sftp-server: Permission denied
debug1: subsystem: exec() /usr/libexec/openssh/sftp-server
debug1: Forced command (config) '/usr/libexec/openssh/sftp-server'
debug1: session_new: session 0
debug1: Received SIGCHLD.
debug1: session_by_pid: pid 3943
debug1: session_exit_message: session 0 channel 0 pid 3943
debug1: session_exit_message: release channel 0
debug1: session_by_channel: session 0 channel 0
debug1: session_close_by_channel: channel 0 child 0
debug1: session_close: session 0 pid 0
debug1: channel 0: free: server-session, nchannels 1
Received disconnect from [My ip address]: 11: disconnected by user
debug1: do_cleanup
debug1: do_cleanup
debug1: PAM: cleanup
debug1: PAM: closing session
debug1: PAM: deleting credentials

Solution 1:

These problems are always easier when debugged from the server side. I recommend starting a second server in debug mode with something like /usr/sbin/sshd -p 2222 -d. Then you can connect from your client with sftp -P 2222 user@remotehost, and expect the server to tell you why it is disconnecting. Most likely there is a permissions problem, my guess is that you aren't meeting the requirement that the home directory be owned by root.