After contacting redhat support and going through a few things, they suggested this solution:
Execute below command and then try to ftp to the server from RHEL5.
# echo 0 > /proc/sys/net/ipv4/tcp_window_scaling
If this works you can make the settings permanent by adding line to
/etc/sysctl.conf as below.
net.ipv4.tcp_window_scaling = 0
It is kind of a "the internet is broken" issue. Starting with the 2.6.7
kernel, TCP Window Scaling was enabled. This is defined in RFC 1323, penned
back in 1992. Apparently, some parts of the internet are still broken.
Here's some further reading on this:
and the "discussion" from LKML:
Props to redhat for a quick solution!