No - it has nothing to do with FTP - The component and template installer in Joomla!CMS is based on php upload..
Request Entity Too Large
The requested resource
does not allow request data with POST requests, or the amount of data provided in the request exceeds the capacity limit.
Apache/2.2.3 (Debian) PHP/5.2.0-8+etch7 mod_ssl/2.2.3 OpenSSL/0.9.8c Server at www.xxxx.eu