I upgraded to 2.5 and was having problems with the new uploader. It would just hang and timeout. I tried all the solutions listed in other posts - cache cleaning, chmod, .htaccess and nothing would work.
So I thought maybe this might be a non-wordpress problem. So I did some poking around with my firewall and security software. Could not find anything wrong with the firewall after tinkering around. So I moved onto my AVG software and Eureka.
AVG like other security has a webshield. I disabled it and bam upload works perfectly. This might only apply to my system, but I thought I would sure my solution just in case it can help someone else.