OK, what server are you guys on? B/C I have this same exact problem and I thought maybe it was just something I was doing wrong. But I followed the rules above:
1. Create subdomain
2. Create FTP user with same name as subdomain
3. Make sure path is same as username
4. Verify name is not 32 characters or longer
5. Verify during FTP I use the correct full username (name
domain.com), etc.
6. Get the stupid 550 error.
I am using DWMX to FTP and have more than 10 domains/subdomains that use to FTP with the same program and I don't have these problems. Only when I try to use an FTP user other than my root. Any help you can give would be MUCH appreciated.