ACZoom

Another "Me Too" to add to this one. I'm having the same problem, so I was investigating it.

/etc/hosts.allow empty, connects fine

Then adding:
vsftpd: ALL: spawn (/bin/echo "Testing: %c-%s" >> /var/log/blockhosts.log 2>&1 )& : allow

gives the following on the ftp client:
[jackie@jackie ~]$ ftp localhost
Connected to localhost.localdomain.
421 Service not available.
ftp>

gives an error in the syslog:
Mar 17 13:42:39 jackie vsftpd[30241]: error: /etc/hosts.allow, line 28: bad option name: "%c-%s""

The ":" messes up the line on hosts.allow.

Remove the ":" and the ftp client still doesn't get to a prompt, which says to me that the problem is with vsftpd's tcpwrappers and not a problem with blockhost.