I was receiving the following error:
The FTP settings are not valid or your FTP server is not compatible with Joomla!: The function "MKD" failed
and stupidly blamed mod_security for the problem (rule 900610 did cause problems so I disabled it -see below), until I tried command line FTP and realised that I couldn't create a new directory due to quota problems. Doh!
I upped the quota and it worked.
To get Joomla 1.5 FTP layer working with mod_security 2 and the gotroot rules I had to disable rule 960010:
#SecRule REQUEST_METHOD "!^(?:get|head|propfind|options)$" \
"chain, t:lowercase, deny,log,auditlog,status:501,msg:'Request content encoding is not allowed by policy',id:'960010',severity:'4'"
SecRule REQUEST_HEADERS:Content-Type "!(?:^(?:application/x-www-form-urlencoded$|multipart/form-data;)|text/xml)"