SSHD CONFIG does not allow password login

I configure /etc/ssh/sshd_config with PasswordAuthentication Yes. The core os machine does not continue with the SSH login with a password.

I will reproduce with VirtualBox, or QEMU. The SSH connection is recognized as a signal in the Parallels virtual environment, but the connection fails. The SSH connection succeeds connecting to localhost, but not externally.

AFAIK this is by design and IMHO is more of a feature than an inconvenience, see Configuring Users :: Fedora Docs.

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You should not directly edit the main config file. Instead, you can add drop-in like shown in the docs.

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ssh with password auth does work when configured.

If you are trying to ssh into root you will also need to config like this:

$ cat /etc/ssh/sshd_config.d/25-permitrootlogin.conf
PermitRootLogin yes

Notice that I your configshould go into files in /etc/ssh/sshd_config.d.