Hi,
FTP for IIS 7.0 allows users to enable FTP for an existing Web site. It saves us from having a separate FTP site to maintain. There is indeed no a best way, setting up a FTP site for a existing website or creating a separate FTP site is depends on users’ preference.
neildt:
However, if I add FTP publishing to this site I get "home directory not accessible" when trying to FTP into the site using the username "mydomain"
Please make sure the user "mydomain" has NTFS permissions on the Web site's content and authorization rule allows user “mydomain” Read and Write access the Web site's content.
Below are some articles about FTP publishing, hope helpful for you:
Adding FTP to a Web Site
http://learn.iis.net/page.aspx/303/adding-ftp-to-a-web-site/
Configuring FTP 7.5 User Isolation
http://learn.iis.net/page.aspx/305/configuring-ftp-75-user-isolation/
Since it is an new question, you can open a new thread on IIS7 publishing forum for further support, more community members can help you in a more efficient way.