Writing protocol code in Erlang is nice, because the parsing is so easy and clear. And if you want to do something that's not so easy by spawning a command, then you may as well build it in Erlang. And it's fun and symmetric to build both a server and a client... I've not looked at OTP SSH code, but I'd assume the ciphering is still calls to external c libraries, as it is in the OTP TLS code.

Of course, easy protocol parsing doesn't do the whole job; state management is required too (and was missed here, clearly).