set up a chrooted SFTP login with OpenSSH
scponly is a hack. The built-in sftp-server with chroot was meant to address this need properly.
Ben, why do you want them to see their home as /home/user? Doesn't that kind of defeat the purpose of a chroot? Is it just pwd output that you're looking for to reflect their location?
Or is it so they can use full paths in a script? I think you could symlink /home/user/home/user to /home/user for those purposes.