1) FileTransferClient's Timeout property works as intended and only applies to synchronous methods, including Connect, for both FTP and SFTP. It was not supposed to apply to async methods, just like HttpRequest's Timeout property in .NET Framework does not apply to async methods either.
What does not work properly is the TimeoutAsynchronousMethods setting, which was originally an old FTP-only tweak in Rebex Ftp's Settings, and was later incorporated into FileTranserClient along with the rest of FTP-only properties.
We will resolve this by making TimeoutAsynchronousMethods work for SFTP as well. If you would like to get a hotfix when this is ready, please let me know.
2) Yes, IsConnected property was set to false in those cases.