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 case someone else bumps into this, the solution for my problem was that I had to run it with sudo:
sudo
sudo ssh -i my-pem-file.pem root@my-ec2-instance-address