A second issue I noticed is that if you change the folder windows folder permissions of the folders that are shared by ftp, the ftp does not work properly anymore. By changing the folder permissions I mean that you share the folder in a local network for example.
Solution:
I took me about a year to gather all the components for my home server, now it is finally mounted in to a closet in my kitchen (picture below). I now run a AMD 2800+ with 1 GB Ram with Windows XP SP 2. In order to make the whole thing more useful than just big hard drive I installed XAMPP and set up my router so it would forward the http:// and the ft:// port to its IP.
I installed Xampp on my Server machine and while the http was working fine the filezilla ftp access showed very odd behavior. After screwing with the problem for several hours i finally realized that the solution was quite simple.
Solution:
Disable your windows firewall, or open the ftp port 21 and you will be fine.