Here\'s the problem
Below is the default rndc.conf that comes with redhat 7.2 ..Notice the only key defined is \'rndckey\' And the default key is set to \'key\' ... thats just not going to work

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/* $Id: rndc.conf,v 1.6.4.1 2001/01/09 22:32:57 bwelling Exp $ */
/*
* Sample rndc configuration file.
*/
options {
default-server localhost;
default-key \"key\";
};
server localhost {
key \"key\";
};
key \"rndckey\" {
algorithm hmac-md5;
secret \"@KEY@\";
};