I upgraded Rachel’s blog to WordPress 2.5 this morning and she immediately began running into trouble uploading files through the new interface. I quickly searched and found this solution. I believe she saw this error because her blog is not located at the root of her domain – she’s at http://rljart.com/blog/ instead of just being at http://rljart.com/. If you’re upgrading and your WP installation isn’t at the root of your domain you might need to create an .htaccess file and follow the directions.

I think this is a bug with SWFuploader and not WordPress, actually.