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You would need to set up public keys on SFTP to allow Adobe servers to connect. Public keys can be downloaded from Data Feed UI. Refer to SFTP section in the below document.
Have you tested the sFTP using the Adobe FTP account, i.e. ftp.omniture.com? I am not entirely sure what to add as the hostname.
From what i understand it will have to be: sftp.omniture.com or sftp2.omniture.com
Path: {{path of the folder}}
username: {{username}}
I would then need to download the RSA public key (available during setup) and store it on the Adobe FTP account level (i.e. under the name of authorized_keys) as well as onto my machines so i can connect, Is that correct?