Something else that may prevent you from getting an ftp session:
Is the shell specified for the user in /etc/passwd also listed in the /etc/shells file? If it isn't, you won't be able to get in.
Also, if for some reason the home directory specified in /etc/passwd isn't there, you also won't be let in by ftp.
In both cases, you can telnet or rlogin, but you can't ftp.