The typical method would be to trash com.microsoft.explorer.plist from ~/Library/Preferences and that should do the trick. Tom tried this, but it had no affect on his problem. Through some detective work in the Terminal (since prefs files are now text-based XML and easily browsable), he determined that IE's prefs are actually stored in the file com.apple.internetconfig.plist in your Preferences directory.
So if you're having trouble with passive FTP, try trashing that file (perhaps along with com.microsoft.explorer.plist) and relaunching IE. It worked for Tom!

