One of the various loglevels should suit your needs.
The local7 is simply a way that syslog allows you to customize what is logged and where it is logged to. It can actually be anything from local0 through (I think) local9.
That way lets say you have one custom program and it logs to local3, and you want to monitor or capture that info in one file, while another of your custom programs may use local4, and it is set to log to a different file.
The various log levels are as follows:
LogLevel
Gives the verbosity level that is used when logging messages from sshd. The possible values are: QUIET, FATAL, ERROR, INFO, VERBOSE, DEBUG, DEBUG1, DEBUG2 and DEBUG3. The default is INFO. DEBUG and DEBUG1 are equivalent. DEBUG2 and DEBUG3 each specify higher levels of debugging output. Logging with a DEBUG level violates the privacy of users and is not recommended.
Unless you downloaded the tarball (source) for ssh, you cannot run a configure. So unless you download and compile ssh, you will have to use ssh through inetd to use tcpwrappers. That can be configured by modifying the /etc/inetd.conf file.
Bryan