I would like to know how i can add a new ftp user and create a directory through using PHP ?? Coz as far as i knew, all the ftp login username and password are stored in a file call *.conf. Currently i am using vsftpd as my ftp server. The problem i am facing now is how i can encrypt the password using my PHP code so that the password are able to be read by vsftpd when the user login ?

Firstly sorry it took so long to answer this.
There are two ways you could solve this. If the passwords are stored in the file *.conf using the standard Unix DES-based encryption algorithm or MD5 you could use the crypt() function to encrypt the password, php notes on crypt here: http://uk2.php.net/manual/en/function.crypt.php
Or you could use the exec() to use the encryption software and capture the result, php notes here: http://uk2.php.net/manual/en/function.exec.php

One thing to note is the crypt function will use MD5 encryption if its on the system, look at the notes to work out how to call explictily.

After that the rest is simple file manipulation!

Hope this helps!