Great, that does it, thanks!
Here’s what it looks like now:
In Yast - users, I have:
user1, with home directory as /home/ftp-docs/user1
user2, with home directory as /home/ftp-docs/user2
ls -l /home
drwrxrwx-x 4 root ftp-users 4096 2010-02-16 10:30 ftp-docs
ls -l /home/ftp-docs
drwx------ 2 user1 ftp-users 4096 2010-02-16 10:31 user1
drwx------ 2 user2 ftp-users 4096 2010-02-16 10:32 user2
In vsftpd.conf, I have as the last two lines:
chroot_local_user=YES (cut and pasted from above, where this was before)
listen=YES
I commented out the local_root=/home/ftp-docs line.
Jail seems to be working out nicely.
Many thanks for your help with this!