I'm happy to say I've found the solution! As we had thought, it turned out to be a relatively minor thing.
This might only apply to an OpenSuse 12.1 installations but to get SSHLocalLoginModule working I needed to modify a line in the ssh config file found here:
To be honest, I do not know why command line ssh via password worked and Pipeline didn't prior to changing the line above from no -> yes, but the modification made everything work.
I can now connect to my Pipeline server.
Thanks for all your assistance!