Scott Klement offers some excellent info on SFTP. Check out http://www.scottklement.com.
Also see a IBM Redpaper titled Securing Communications with OpenSSH on IBM i5/OS.
With these 2 resources I was able to setup SFTP between our IBM i and a Unix system.
There is a free software tool called Expect that Scott talks about that can be used to send a password instead of using public/private keys.
I have SFTP running in a batch mode, but was not able to get Expect to work for me. It was easier to exchange public/private keys.
Hope thsi helps,