I've been struggling getting the flash uplader working on my wpmu 2.6.5 site, luckily I found an "explanation" why it's not working at http://www.chewie.co.uk/general/wordpress-image-upload-http-error/ and a solution: the noflash uploader plugin.
Since my site will have both mac and non-mac users, I modified the plugin so it only turn off flash uploading when you're on a mac. Here's the modified plugin:
add_filter('flash_uploader', 'noflashuploader');
function noflashuploader(){
$user_agent = isset($_SERVER['HTTP_USER_AGENT']) ? strtolower($_SERVER['HTTP_USER_AGENT']) : '';
if(strpos($user_agent, 'mac') !== false) {
return false;
} else {
return true;
}
}