Me also got same problem. Thanks to your post for this problem and I got saved from this.
Just had this problem with one of my clients, hosted it on their shared host as they didn't want to use ours (*sigh*)
Kept getting a HTTP error on files over 100KB. 500 Internal Server Error was the only response.
Logged into plesk, checked the error logs and found this:
[Wed Oct 19 12:03:53 2011] [warn] [client 126.96.36.199] mod_fcgid: HTTP request length 132180 (so far) exceeds MaxRequestLen (131072)
Realised their server was running in FastCGI mode!
switched that to run as Apache module, switched off safe mode.
then had this: [Wed Oct 19 16:18:02 2011] [error] [client 188.8.131.52] PHP Warning: fopen(/var/www/vhosts/xxxxxxxxxxxx failed to open stream: Permission denied in xxxxxxxxx
SS wasn't able to write to the tmp folder, so just quickly created a "silverstripe-cache" folder in the site root with 777 permission and all is well.
Hope this helps others.