Actually, CTS must be pulled low, or else the chip can stop transmitting, as per the hardware flow control. So the connection diagram looks to me more like this:
FTDI Basic | Arduino
DTR ---------- Reset
TXO ---------- RXI
RXI ---------- TXO
3V3 ---------- +5V (it's mislabeled; only 3.3V when you flip the solder switch from default 5V)
CTS ---------- GND (pull low)
GND ---------- GND