HTTP Error when uploading images through Flash uploader

I'm using WPMU Version 2.8.5.2 with BuddyPress and when I edit a post and try to upload media such as images through the Flash uploader, I get "HTTP error" in red.

I've tried the browser uploader and it works fine, so it's just the flash uploader.

I've tried it in different browsers and on different computers and with different versions of Flash and have tried re-uploading the /wp-includes/js/swfupload/ directory... still doesn't work.

Any ideas? Anyone else having this problem?