OpenSSH is almost completely compatible with the commercial SSH 1.2.x.
There are, however, a few exceptions that you will need to bear in
mind while upgrading:

1. OpenSSH does not support any patented transport algorithms.

Only 3DES and Blowfish can be selected. This difference may manifest
itself in the ssh command refusing to read its config files.

Solution: Edit /etc/ssh/ssh_config and select a different "Cipher"
option ("3des" or "blowfish").

2. Old versions of commercial SSH encrypt host keys with IDEA

The old versions of SSH used a patented algorithm to encrypt their
/etc/ssh/ssh_host_key

This problem will manifest as sshd not being able to read its host
key.

Solution: You will need to run the *commercial* version of ssh-keygen
on the host's private key:

ssh-keygen -u /etc/ssh/ssh_host_key

3. Incompatible changes to sshd_config format.

OpenSSH extends the sshd_config file format in a number of ways. There
is currently one change which is incompatible with the old.

Commercial SSH controlled logging using the "QuietMode" and
"FascistLogging" directives. OpenSSH introduces a more general set of
logging options "SyslogFacility" and "LogLevel". See the sshd manual
page for details.

4. Warning messages about key lengths

Commercial SSH's ssh-keygen program contained a bug which caused it to
occasionally generate RSA keys which had their Most Significant Bit
(MSB) unset. Such keys were advertised as being full-length, but are
actually only half as secure.

OpenSSH will print warning messages when it encounters such keys. To
rid yourself of these message, edit you known_hosts files and replace
the incorrect key length (usually "1024") with the correct key length
(usually "1023").

5. Spurious PAM authentication messages in logfiles

OpenSSH will generate spurious authentication failures at every login, 
similar to "authentication failure; (uid=0) -> root for sshd service".
These are generated because OpenSSH first tries to determine whether a
user needs authentication to login (e.g. empty password). Unfortunatly
PAM likes to log all authentication events, this one included.

If it annoys you too much, set "PermitEmptyPasswords no" in 
sshd_config. This will quiet the error message at the expense of
disabling logins to accounts with no password set. This is the 
default if you use the supplied sshd_config file.

6. Empty passwords not allowed with PAM authentication

To enable empty passwords with a version of OpenSSH built with PAM you
must add the flag "nullok" to the end of the password checking module
in the /etc/pam.d/sshd file. For example:

auth required/lib/security/pam_unix.so shadow nodelay nullok

This must be done in addtion to setting "PermitEmptyPasswords yes"
in the sshd_config file.

There is one caveat when using empty passwords with PAM
authentication: PAM will allow _any_ password when authenticating
an account with an empty password. This breaks the check that sshd
uses to determined whether an account has no password set and grant
users access to the account regardless of the policy specified by
"PermitEmptyPasswords". For this reason, it is recommended that you do
not add the "nullok" directive to your PAM configuration file unless
you specifically wish to allow empty passwords.