Why are there two functions.php files mentioned? "Does anyone have any tips for editing functions.php (either admin or root)?" There's no functions.php in the root of my vBulletin.
What I use to edit files is good ol' Notepad. It's free (it comes with Windows). It's a small, simple program. In Windows 2000 or XP, it's a lot better than in other versions, because it recognizes more keyboard shortcuts, like Ctrl-F to find, which is a big help. It doesn't do any fancy highlighting or anything, which I guess I don't need, since I've gotten along just fine without it for all this time.
For FTPing, I use WS_FTP Pro. I like the way the newer versions automatically reconnect if you try to do something after the connection has timed out. I also like the new Transfer Manager window, which lets you start a transfer, then change to a different directory and start another transfer, while the first one is still going. They get queued. The newer versions are a lot nicer than the older ones.