I discovered what the problem was
I've two computers networked together. The machine I've got Trainz running on is linked to a machine acting as a gateway, both have zone alarm on, which connects out to the net.
The problem resolved when I turned off the firewall on the gateway machine.
After reading the zonelabs forum. The problem is the Application Layer gateway (alg.exe) on the gateway machine. This needs to be set to allow to let FTP access through.
Just incase anyone else has the problem.