I'm having this problem too. I've just tested it and I can ftp to my server with the given credentials and can write/overwrite files, so there should be no problem!
Tbh, I don't understand why FTP is even part of this process. Wordpress is a good example of how to do plugin updates: So long as the web server user has permission to write to the appropriate directories, it downloads and installs updates and plugins in the background. Wordpress only falls back to FTP if it can't do that.
The other thing is that I don't normally run an FTP server as they are generally considered insecure (though I am using VSFTP in this case). So it's a pain to do updates as I have to manually start the ftp server each time.