I don't quite agree with your statement. :) The Pipe symbol is not a delimiter for logins or I've never seen them used in AD. I setup an IIS 7.0 and FTP site (using the IIS 7.0 Publishing service). Both had All Unassigned configured in the bindings, and I was able to use a domain\username account. I'm using CoreFTP and FileZilla to connection and not Expression, but FTP is well, FTP. I was able to use FTP over SSL and plain FTP.
When I try a 'ftp' host header, I'm getting 550 Host not found. I tried using an FTP client right on the server, no go. I even got the 534 TLS error others have posted, which is cool, I don't know the answer yet, but I know how to reproduce the error. I'm not quite sure how FTP host-headers work under the covers, I even tried putting the entry in the hosts to do a resolution lookup. I can ping the A record, do an NSLOOKUP to the 'ftptest' host name I'm using. DNS is clean, the AD account is good, the account I'm using is a 'domain admin'.
Here is the error I get from my FTP client.
Mem -- 523,752 KB, Virt -- 2,097,024 KB
Started on Tuesday December 18, 2007 at 22:31:PM
Resolving ftptest.aspdot.net...
Connect socket #644 to 192.168.0.63, port 21...
220 Microsoft FTP Service
USER aspdot\testuser
550-No such host is known.
Win32 error: No such host is known.
Error details: Hostname didn't match any configured ftp site.
550 End
I'm going to see what I can find. I'd be curious if others have been able to use FTP host headers?! Stay tuned...