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The Event 4226 has nothing to do with this.
Windows XP SP2 is used on many PC with ioFTPD installed, and is working perfectly. There is no SP2 vs ioFTPD bug.
If you can connect locally, it means ports are listening.
If you can't connect from outside, check your firewall log (sp2 firewall got a very good log that will tell u when connections are blocked, provided that u enabled the log option in the fw options) and read the kb.
http://www.ioftpd.com/kb/view.php?kbid=51
http://www.ioftpd.com/kb/view.php?kbid=11
http://www.ioftpd.com/kb/view.php?kbid=71