I'm just glad to know that I'm not the only one who can't get FTP to work. I tried their fix (putting the username/password directly in the URL) with no success.
My issue with editing my blogs in a WYSIWYG window are apparently a known issue as well.
http://msdn.microsoft.com/ie/releasenotes/default.aspx
Update: I was able to connect via FTP uby specifying it in the URL but I still can't transfer files like I can with IE6. No matter what option I select for "Enable Folder view for FTP sites" it looks the same.