This work-around almost solved my problem -- but my time_t was a 64-bit integer. I believe that pack("L!L!",...) is more portable in this case.

There is also a select call in the client loop that can be another cause delay. Select has the option of providing a timeout value, but the SSH2.pm code doesn't utilize it. The solution is discussed here:

Re^4: Net::SSH::Perl hangs(during cmd), but only in Mason environment

Well this workaround is for timeout while creating SSH object or the timeout is applicable while executing a SSH command using that object. Will it die if there is no response from the command.
Thanks

sourceserver unixtime: Reading configuration data /usr/local/apps/.ssh
+/config
sourceserver unixtime: Reading configuration data /etc/ssh_config
sourceserver unixtime: Connecting to targetserver, port 22.
sourceserver etc: Remote protocol version 2.0, remote software version
+ OpenSSH_4.3
sourceserver: Net::SSH::Perl Version 1.35, protocol version 2.0.
sourceserver: No compat match: OpenSSH_4.3.
sourceserver: Connection established.
sourceserver: Sent key-exchange init (KEXINIT), wait response.
sourceserver: Algorithms, c->s: 3des-cbc hmac-sha1 none
sourceserver: Algorithms, s->c: 3des-cbc hmac-sha1 none
sourceserver: Entering Diffie-Hellman Group 1 key exchange.
sourceserver: Sent DH public key, waiting for reply.
sourceserver: Received host key, type 'ssh-dss'.
sourceserver: Host 'targetserver' is known and matches the host key.
sourceserver: Computing shared secret key.
sourceserver: Verifying server signature.
sourceserver: Waiting for NEWKEYS message.
sourceserver: Send NEWKEYS.
sourceserver: Enabling encryption/MAC/compression.
sourceserver: Sending request for user-authentication service.
sourceserver: Service accepted: ssh-userauth.
sourceserver: Trying empty user-authentication request.
sourceserver: Authentication methods that can continue: publickey,gssa
+pi-w
ith-mic,password,keyboard-interactive.
sourceserver: Next method to try is publickey.
sourceserver: Next method to try is password.
sourceserver: Trying password authentication.
Taking too long to complete.  Timed out after 60 seconds.
[download]

The easiest solution would probably be to just patch or to redefine the module debug function.

Another, less intrusive, option is to tie STDERR to an object that prepends the current time to every printed line.

Thanks salva for the suggestions. I added the time() in the debug line as I not sure to tie time to STDERR. Suggestion welcome. As far as the timeout is concerned, issue is from

sourceserver: Trying password authentication.
to 
sourceserver: Login completed, opening dummy shell channel. (please no
+te this obtained from a successful login attempt, without timeout)
Taking too long to complete.  Timed out after 60 seconds.
[download]

I'm using following code to logon to target server:

$ssh = Net::SSH::Perl->new($server, debug => 15, 
options=> [
            "UserKnownHostsFile /usr/local/apps/.ssh/known_hosts"]);
[download]

Is there other option I could use to debug this further? Thanks.