I've just setup a fresh LAMP install along with vsftpd and openSSH on Xubuntu. Apache is setup to serve pages from home/*/public_html and vsftpd is chrooted to the users home dir.

So far so good.

However,the ftp sends the user log in in plain text, which seems to be identical to the telnet log-in and password that enables root privileges.

I guess can create a user with fewer privileges but that I (as admin) have to use two accounts. So how do I set it up that local users can log in with a different password that doesn't give privileges?

Or am I taking the wrong approach here?

ftp by its nature is insecure.

If you want secure login you should use sftp or scp - these use the same encryption and port as ssh.

Though it is possible to create two user names with the same UID number this would not be beneficial. The system would interpret the secondary ftp user as being the same as the original non-ftp user because it is the UID number that is important.

If you really must use ftp you might consider using pgp encryption of the files that you transfer.