Drop in FTP whilst racing

I trained throughout 2009 in and around threshold using heart rate and PE. I do not own a power meter. In the early season, I rode several log sportive s and longish road races and was riding well. In mid season, I rode a time trial PB and rode well in and was competitive in 1 hour crits. In the past 2 months, I have rode many crits (twice per week) and short interval sessions in between. I have completed no longer events and have done little in the way of extended rides around threshold. Today, in my last crit of the season I struggled and got dropped despite feeling fresh at the start. My question is: Can ones FTP drop even though racing consistently. Is it possible, to maintain ones FTP throughout the racing season or are scheduled periods of rebuilding required during the season.

Yep, especially if you're racing tactically and not hitting and holding your best power numbers during your races. But FTP like everything else is a bit of a 'use it or lose it' situation. Get into 'race and recover' mode with a day of short intervals to supplement your racing and both your CTL and FTP will likely drop.
Yes, and yes.

Do at least one day per week of high SST if not solid L4 work, perhaps race a bit less if you can't recover well enough before or after racing and still do some high SST/Threshold work weekly. Keep some sustained FTP work in your training diet especially if you're not racing TTs or road races with sustained climbs/crosswind sections or other situations where you have to sustain near Threshold power for 10 to 20 minutes mid race. A diet of crits and short intervals with no sustained work is a recipe for sagging FTP unless you get away alone in those crits pretty often.

And yes, it's typical to do a winter/spring build, spend a bunch of that accumulated training load in early season racing - back off from racing for some rest, a second build cycle and then spend that in late season racing. It's very tough to race frequently for an extended season without sagging as the season wears on. Some of that can be mental, but a lot of late season staleness, burnout or poor race results comes from racing away your base fitness and not taking a break from racing to recover a bit and rebuild.

-Dave