I\'ve just setup my EC2 server following this video here exactly - http://www.youtube.com/watch?v=bBajLxeKqoY
I even chose the same server type, everything went well
In my case, we had been copying a text file to keep a ubiquitous key. Someone accidentally added characters to this file, and we started getting prompted for a password from the now-corrupt .pem file, when we had never set a password.