aborts at "Reading Remote Directory"

i just updated my server with suse 10.1. i have ssh running on it and i am trying to connect to it from my windows xp sp2 box using winscp 3.8.1. i can log in (i get authenticated) but winscp hangs at reading remote diretory. i get the same behavior using putty. i can log in but as soon as i send the "ls" command, putty shows like 4 files and hangs.

not sure if it's a server problem or a client problem. any advice?

99% it's server-side problem.