I cannot use the up and down arrow keys when I sftp from fc5->fc5. It would be good if sftp supported readline.
Thanks for your report. readline is under GPL, which is incompatible with the OpenSSL license. sftp can use libedit if present, however libedit is currently in Fedora Extras and thus not available for Fedora Core packages yet. This should change in Fedora 7.
libedit will be enabled in openssh-4.7p1-1.fc8