FTP Watcher is designed to watch a folder on your Mac for activity. It will not work with a folder on the server, I'm afraid, although certainly it's a reasonable feature request

That said, it might be worthwhile investigating the use of a Scheduled Synchronization, using the Update Mac setting. You could set it to download new/changed files every five minutes. Obviously this might result in downloading a partially written file from the server, but when the next Sync runs Yummy would see that the file was changed on the server and replace the partial file on your Mac with the fully written one. How does this sound?
I already have an item on my To Do list which would enable Yummy to .zip files before uploading them, but .zipping before downloading is not. Is that what you meant?