I tried creating sftp server using OpenSSH and I get some errors.
First I tried on Microsoft Windows Server 2003, R2, SP1 and then on Windows XP Professional, SP2 and the error is same.

Installation went smoothly on both the OS (after a few complications, see note at bottom), but when I tried to start the service, I get the following error:

Could not start the OpenSSH server service on local computer.
Error 193: 0xc1.

Here is the log of error from EventViewer (System)

The OpenSSH Server service failed to start due to the following error:
OpenSSH Server is not a valid Win32 application.

I followed the procedure as given on the following websites:

Note:If you try creating the server by yourself you might face complications while editing the passwd and group file:

Instead of following:

mkgroup –l >> ..etc/group
mkpasswd –l –u username >> ..etc/passwd

you could use:

mkgroup –l >> "C\:Program Files\OpenSSH\etc\group"
mkpasswd –l –u username >> "C\:Program Files\OpenSSH\etc\passwd"

I guess you can use both backward and forward slash.