The root directory had been created and had been selected by browsing to it in the Properties page. In this example, lets call it d:\ftproot
A whole group of us were logging in as the main user of this ftp service. Every time it went into a sub-directory of the root directory. I changed the configuration to allow anonymous login, which logged in to the FTP root directory.
It took a shamefully long time to realise that the sub-directory had the same name as the account logging in.
It seems that FTP accounts with the same name as a directory in the FTP root directory will be handled as though that directory is the account's Home Directory. We resolved the problems just by re-naming the sub-directory. D'Oh!
I had the devil of a job finding anything on Google before realising this was a home directory issue. Actually even after realising it, Google failed me. Not a situation I'm familiar with, I must admit.