I ran into the HTTP Error on a production machine and could not resolve it, even by moving the phpsessions to a different directory as detailed here - http://www.leftandmain.com/silverstripe-tips/2011/02/15/uploadify-http-error-explained-and-solved-maybe/. Hard to debug when you dont speak the same language as the sysadmin, and cant see the error/access logs :(
So I took a different approach and decided to change uploadify to use HTML5 upload instead. It appears to be working, though is lacking a few things:
1) No error reporting
2) No upload cancel
3) I've only tested it in Google Chrome
4) Progress meter is text (e.g. 30%) instead of a progress bar
5) Some of the events still rely on the existence in the DOM of the flash uploadify elements, which I've hidden visually
Code is available at https://github.com/gordonbanderson/Uploadify/tree/html5
Please consider this very alpha software, as it was a bit of a rush job :)
Cheers
Gordon