I figured out what was going on. The FTP user stuff requires you to put the path to the joomla installation, but that path is actually the ftp client path, rather than the server path. When you log into a domain ftp space, the ftp server root path is "/", even though the server path is /usr/local/www/vhosts/domain.com/
When setting up joomla 1.5, then, the FTP root path is /httpdocs/joomlasubdirectory, not the full server path.
So, it was my mistake and had very little to do with Plesk. But maybe this answer will help someone else...