You were on the right track it had to do with the ls, but putting ls in the ftp directory did nothing here is what I did.
I found that the default instalation worked. The default installation used the "ls" command from the busybox. I created a little script:
# !/bin/sh
/bin/busybox ls $*
that links the ls command back to the busybox, and I removed the ls.exe fromt the /bin directory.
This gave me the colored text back, and allowed my ftp client to "see" the files! (same as the default instalation)
Works prefectly now.
Thanks for the help!