Same old Same old
I am convinced this is a bug and no magical config....

This site explains the bug http://www.chezludo.com/ftpchroot.html
and how to fix through recompiling ftpd.

I got it to work by swapping the screwed ftpd file - however - EVERY file I upload to the incoming (drop box) is corrupt ??????
Anyone else having this issue.
All my privs and directories are spot on - can access it from work as an anonymous user - but the files I upload just get scrambled or truncated by a few k, resulting in a -5000 error when trying to uncompress. Even .jpg files just don't work ???

Never mind -
I found my answer.... it's called " Pure-Ftp" - works a treat and easier to configure either as standalone or xinetd.

ftp://ftp.pureftpd.org/pub/pure-ftpd/releases/pure-ftpd-1.0.14.tar.gz