FTP and SFTP are two different things. FTP is already chrooted. Enable SFTP is what lets them out. If you're going to go the SFTP route, try using Groups (Option 1):
Each user gets their own group, and you're a member of it. chgrp will keep other users out of their (and your) directory. They won't be sandboxed, but they won't get into your other directories. Limiting them to FTP will sandbox them, though.