Wow, I got connected... I have been struggling with this for a few days.
So I use Filezilla (http://filezilla.sourceforge.net/
) as my ftp client.
Since I was still having problems, and not getting anywhere with looking at my pam.d/proftpd file I decided to play around with my client for a few.
First off... you HAVE to have puTTY installed on your windows PC.
In Filezilla, add your ISPConfig server in Site Manager.
choose SFTP using SSH2
Then use your ISPConfig user that is configured, e.g. webx_username and the password you assigned to this user.
I got connected and am now happily using if to load files and remove them as well.