If you want your guest users to login without providing a valid username and password then yeah you should use anonymous. By default the anonymou configure will chroot and chdir the directory you specified in the directive.
So for example with this configuration:
Useralias anonymous ftp
When the anonymous user logs in the ftp, the root directory in their ftp client will be /home/ftp on the server's filesystem, with the filesystem privege of the local user account "ftp" which it is mapped to.
What the error message on the ftp client?