Google has decided that FTP is no longer worth the bother to them:
FTP remains a significant drain on our ability to improve Blogger: only .5% of active blogs are published via FTP yet the percentage of our engineering resources devoted to supporting FTP vastly exceeds that. On top of this, critical infrastructure that our FTP support relies on at Google will soon become unavailable, which would require that we completely rewrite the code that handles our FTP processing.
Apparently they’re not planning to outsource it to China, either:
[W]e will no longer support FTP publishing in Blogger after March 26, 2010. We realize that this will not necessarily be welcome news for some users.