So we should all turn off FTP on our servers?

Yes! Any smart sysadmin will turn of FTP services, especially non-anonymous FTP services.

Your not running ftpd with some special permissions, your actually attempting to login to ftp localhost.

To be able to do that, you got to have something running on the FTP port. That something, which is often called ftpd, has got to read /etc/system. To be able to do so, that something needs special (UID = 0) permissions.

Abigail