@mavery - Do you have password protection on your site by chance?
I did and I just removed it and re-tested the flash uploader and lo, it works as advertised.
I was getting 401 errors because the Flash Player wasn't authenticated against Apache (.htpasswd)
(I see 401's in the logs for the cron daemon as well with Apache authentication turned on)
Yup.. See my other post. Any way to resolve that issue? I've got the password wall up because we're not quite ready to go live yet, but we need to be able to seed content during our internal UAT phase.