Thanks for the info. I seem to be getting somewhere, but don't bring out the champagne yet - this could still go horribly wrong
1. Created the sftponly group.
2. Created a user that is located in /home/user1. Chowned recursively to root:root.
3. Mounted the /var/www/html/site1 directory to the /home/user1/site1 directory. Then to permit write access, I chowned recursively the /home/user1/site1 directory.
4. Logged in via FileZilla, showed up fine. Tried to write something to that mounted folder, worked. Tried to delete, worked.
I am still not perfectly comfortable with it, since I don't quite understand what I did. If anyone spots something wrong with it, please say so.
Selinux is disabled for now, since I did not have the luxury to add another level of complexity to my problem-solving process. Will be back after I have this sorted.
Aha moment: you have to force group membership, using usermod -g. And then mount, double chown.