Yes, correct. If you are not using AD or PNagent you should signon as admin and create a password. This password will be written to the admin.ini file (not in clear text and make sure you can write to the ftp server while this happens.
After this you can then log in with the admin/password and set the ftp server back to read only.
The Blazer admin guide on Wyse.com has this process and I assume the Linux guide as well (I have not checked).
Its a bit strange but for sites with a few terminals it works OK,
Cheers,
-TT