The problem, AFAIU, was that some user had a password-less key stored on some external system (their personal home computer, for all I know). That system was hacked, and allowed the attacker to access the HPC system. I don't see how the HPC center staff getting the Puppet-gospel could have prevented that person from using a password-less key. Well, except by disabling key-based logins (which, AFAIU, they could have used Puppet/cfengine/whatever for).

My point is that in general it would be better to disable password auth and only use key based auth, but only if you could somehow guarantee that the users wouldn't do crazy things like use password-less keys. But as you can't do that on the server-side, what other options do you have?