gistfile1.txt

This is the MASTER
root@ed750:~# ntpq -pn
     remote           refid      st t when poll reach   delay   offset  jitter
==============================================================================
*127.127.1.1     .SFDC.          12 l   19   64  377    0.000    0.000   0.001


This is the SLAVE
root@squire:~# ntpq -pn
     remote           refid      st t when poll reach   delay   offset  jitter
==============================================================================
*127.127.1.1     .SFNS.          14 l   49   64  377    0.000    0.000   0.001
 127.0.0.2       LOCAL(1)        13 l   46  512  377    0.454  18821.1   2.085

This is why the slave is rejecting the master:
ntpq> peers
     remote           refid      st t when poll reach   delay   offset  jitter
==============================================================================
*LOCAL(1)        .SFNS.          14 l   59   64  377    0.000    0.000   0.001
 127.0.0.2       LOCAL(1)        13 l  121  128   17    0.454  18821.1   1.025
 
ntpq> as
 
ind assID status  conf reach auth condition  last_event cnt
===========================================================
  1 54243  9614   yes   yes  none  sys.peer   reachable  1
  2 54244  9014   yes   yes  none    reject   reachable  1
 
ntpq> rv 54244
assID=54244 status=9014 reach, conf, 1 event, event_reach,
srcadr=127.0.0.2, srcport=123, dstadr=127.0.0.1, dstport=123, leap=00,
stratum=13, precision=-20, rootdelay=0.000, rootdispersion=11.047,
refid=LOCAL(1), reach=037, unreach=0, hmode=3, pmode=4, hpoll=8,
ppoll=7, flash=800 peer_loop, keyid=0, ttl=0, offset=18821.132,
delay=0.454, dispersion=439.600, jitter=0.956,
reftime=d52e47f1.00cb97c3  Fri, May  3 2013 14:28:01.003,
org=d52e47f8.d36779e1  Fri, May  3 2013 14:28:08.825,
rec=d52e47e6.0112d688  Fri, May  3 2013 14:27:50.004,
xmt=d52e47e6.00f2109a  Fri, May  3 2013 14:27:50.003,
filtdelay=     0.48    0.45    0.56    0.51    0.51    0.00    0.00    0.00,
filtoffset= 18821.8 18821.1 18820.5 18820.1 18819.8    0.00    0.00    0.00,
filtdisp=      0.00    1.92    3.84    4.80    5.75 16000.0 16000.0 16000.0

If I just restart the slave, it will select it however:  

root@squire:~# ntpq -pn

remote refid st t when poll reach delay offset jitter
127.127.1.1 .SFNS. 14 l 36 64 1 0.000 0.000 0.001
*127.0.0.2 LOCAL(1) 13 l 19 64 1 0.438 1.793 0.018

Here is the SLAVE after a restart

root@squire:~# ntpq -pn

remote refid st t when poll reach delay offset jitter

127.127.1.1 .SFNS. 14 l 36 64 1 0.000 0.000 0.001
*127.0.0.2 LOCAL(1) 13 l 19 64 1 0.438 1.793 0.018