I was trying to get SVN set up as a daemon on my OSX 10.4 (Tiger) machine when I started running into this error upon connection:

bash: line 1: svnserve: command not found
svn: Connection closed unexpectedly

Some searching later I really couldn't find anything that might have been causing the problem, other than the obvious notion that the path was not working correctly. A little fiddling later I discovered the problem - the ssh daemon was by default configured to not load any user environment files (which are used to set the command path, etc). To fix the problem I had to first enable the option PermitUserEnvironment and then restart the service:

sudo nano /etc/sshd_config

Search (control-w) for the string "PermitUser" then uncomment the line (remove the # sign) and change the the "no" to "yes". Then all I had to do was restart the ssh daemon and it was good to go:

sudo SystemStarter -v restart SSH

Et voila!