How to isolate ftp users in IIS 7?
Isolated FTP usually requires the DOMAIN as the first part of the "user share" - ref: http://learn.iis.net/page.aspx/305/configuring-ftp-75-user-isolation/
To create home directories for each user, you first need to create a physical directory under your FTP server's root folder that is named after your domain or named LocalUser for local user accounts. Next, you need to create a physical directory for each user account that will access your FTP site.
%FtpRoot%\LocalUser\%UserName% (non-domain)
%FtpRoot%\%UserDomain%\%UserName% (domain)