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It appears this was an issue with TLS 1.2 on Windows FTP servers. Hotfix available here:

Not sure why Textastic gave a different error message than Filezilla, but the error in Filezilla (550: The supplied message is incomplete. The signature was not verified.) pointed me directly to the microsoft hotfix.
I had a look at the log file, but I am not that much wiser. There are a few warnings about the certificate being issued for a different domain to where I am connecting (I am connecting via local IP), but I do not see how that can be related.

The actual errors related to the file seems to be the following:
"0000: 550 The system cannot find the file specified. .== info: Given file does not exists."

I can upload files via normal FTP using Textastic, and I can upload files via FTPS using Filezilla from a different computer. I am however seeing some strange behaviour in Filezilla where the file is uploaded and then I get a warning about overwriting the file I just uploaded.

Seems this may be a server issue, and not a Textastic bug. I need to investigate a bit more, but I may have reported a false positive here. Sorry if so :/
Please keep this "feature", if kept as a separate optino. I need the extra buttons as my iPad keyboard is tiny and does not have all the keys needed for coding, such as curly brackets. With no way of showing the additional keys when using an external keyboard textastic would be useless to me.