An email from a former student at The University of the West Indies School of Continuing Studies made me chuckle, since they were having the same problem I recently had. My Linux machine was down, so I was working from Windows 7 (yeah, I know).
Myself and an IT Manager were going crazy trying to figure out why, on a particular server, we could log in to CPanel and change files one at a time, but when we tried to automate using SFTP with WinSCP, we were getting 'permission denied' errors. As far as we could tell, there was nothing wrong with the server itself. The issue was a Permission Denied (3) error, and as you can tell from the link, it's been reported off and on for about 8 years.
<InstructorHat>When you are using a tool and getting unexpected results, try a different tool</InstructorHat>
I logged in with trusty Filezilla and had no issues. Try it if you're in the suck - or find a Linux/OS X machine and try it. The issue, which apparently isn't that common (or I'm sure they would have fixed it. WinSCP is a great tool that normally works fine), shouldn't be a setback during a project.
Of course, when downloading Filezilla, make sure you don't get one of the Adware bundles of it. It's unfortunate that to make a living developers sometimes resort to adware. There's a bigger problem in Free Software/Open Source where many don't donate for the software they do use, which is a philosophical and economical debate I've seen both sides of and I'm sick of. We all do what we must to eat.