You should have read the comments that appear in most of the default vsftpd.conf files -
# You may specify an explicit list of local users to chroot() to their home
# directory. If chroot_local_user is YES, then this list becomes a list of
# users to NOT chroot().
# (default follows)
The users automatically get trapped once chroot_local_user gets set to YES. By writing them into the chroot list, you basicly give them a get out of jail free card.
Also, you were worried about users being able to read system files. Why? They can read almost anyplace, but other than within their home directories, they can't write. That is one of the beauties of the *nix system. Had they tried to upload a file to /etc, it would have failed. They don't have write permission there.