Using FWE, I have set up the hotkey so that if I hold down the sneak key for a second the stealth field is activated. I can see myself go invisible, however enemies can still see me, even though I am invisible and a considerable distance away. It appears that the stealth boy isn't working at all.

Were they seeing you before you activated the Stealth Boy?

Its not just sight but sound that gets you detected, so there is that too.

I am sure that FWE gimps the Stealth Boy, as the aim of that mod it is to make the game harder.

FWE's Stealth Field feature can be a bit flaky, so you might want to check the settings under Ability/Hotkey Menus/Stealth Field. I got a "you already have a stealth field" message even when I didn't have one and messing around a bit with the settings (I ended up with the same settings as I had before) fixed it. Also, sneaking is harder than in vanilla on default so you might want to check those settings as well under Character Settings/Sneak.