xauth has to be installed on the Server.
root@server: yum install xauth
sshd_config is only serverside.
ssh_config is client side.
Allthough you probably use your machine as both anyway, so you might want to change both config files on all of your systems.
#/etc/ssh/sshd_config X11Forwarding yes
service sshd restart
#/etc/ssh/ssh_config ForwardX11 yes ForwardX11Trusted yes
To actually use the feature use the switch -X. For example:
ssh -X root@server virt-manager