psftp is bundled with the plugin, so it should not matter if it in your path. I presume that you have the timeout set to the default of 5 seconds? It may be that there is some sort of interactive prompt being presented by psftp that the plugin isn't yet programmed to handle. If you go to Preferences > Package Settings > SFTP > Settings – User and paste the following, some debug information should be printed to the console (ctrl+`):
You can follow up with me via firstname.lastname@example.org with what you find.
In terms of upload on save, the default is to save on upload. I'm open to feedback on this feature, especially regarding whether or not it should be a global setting, or per remote.