It seems like we run into a variation of this every couple of years, and I'm not sure it has ever been determine just what is happening. I believe that the general explanation is that ZTERM uses some different networking components on the PC side than the Command Prompt FTP uses. ZTERM's FTP uses WININET.DLL; FTP.EXE does not use that. But WININET probably should not be updated by itself, as it interacts with other components.
So, my suggestion would be to make sure the installation of Windows on the PC is fully patched and updated. If that seems to be the case already, you might try uninstalling then reinstalling IE (since that should refresh all of the related networking modules.)
If that doesn't do it, then we'll have to dig deeper...