Your comments

NSURLErrorDomain error -1001 is "kCFURLErrorTimedOut" - "The connection timed out."

So, the Dropbox server didn't respond in time. Maybe there is a problem at Dropbox at the moment?
A lot of the features you mentioned will be supported in Textastic 3.0.
You can enable the "Debug Log" setting in the FTP configuration screen. This will create a log file in the local "logs" directory in Textastic that you can view to see what's going on behind the scenes.
No, it's not supported in the current version of Textastic.

I plan to make it possible to add custom syntax definitions in Textastic 3.0.
csv

What exactly is missing for you in order to work with CSV files?

Do you mean that it should be possible to preview .css files that are not used in an html file? That doesn't make much sense because css stylesheets are used to style html files and don't have much meaning by themselves.

You need to reference a css file with the proper html tags in an html file and preview the html file instead.
Of course, a CSS file that is in the same directory as an HTML can be used directly like that:

<link href="screen.css" rel="stylesheet" type="text/css" />

Also, inline CSS is supported. I use it all the time. In fact, everything that's supported by Mobile Safari should also work in Textastic's preview. What exactly did you try?
Does this happen even when you just have a plain text file with only a few lines or does it happen with a specific syntax highlighter and large files?

To add to the point about the WebDAV server – I just remembered why I enabled this setting in the first place (I implemented this about 9 months ago):

It's not possible to start the WebDAV without a Wifi connection. The WebDAV configuration screen in Textastic detects if a wifi connection is available and shows an error message if it is not. Without a wifi connection the iPad wouldn't have an ip address assigned in the local network and so the server couldn't bind to an ip address. Without the UIRequiresPersistentWiFi setting, iOS wouldn't connect to the network by itself and so it would never be possible to start the WebDAV server.