The PasswordAuthentication option in sshd_config should have the following extra values: * default-yes Allow password logins for users that don't have a .ssh/disallow-passwords file * default-no Disallow password logins for users that don't have a .ssh/allow-passwords file This would let users choose whether to allow passwords for their account, and would allow administrators to choose the default behaviour.
You (ie the administrator) can use a Match block in sshd_config to configure PasswordAuthentication per user, eg: PasswordAuthentication yes Match User fred PasswordAuthentication no see sshd_config(5) for more information. This doesn't let users control their authentication methods but I'm not sure that's a good idea anyway.
closing resolved bugs as of 8.6p1 release