So I've been having this problem on a few sites that I have upgraded to 3.5.
When I try to upload an image with the fancy uploader it gives me a http error.
When I try to use the browser uploader I get a 503 page.
I've tried everything I could think of, going back to default theme, disabling all plugins. I've even put up a test site and install 3.5 there and right after installing WordPress I tried to upload an image and it tells me http error or 503 error.
From what I can figure out 3.4 works perfectly but when I upgrade to 3.5 the media uploader fails on the default WordPress install. The only images the 3.5 install can work with are very small (think 100 x 100) images. File size doesn't matter (I've tried a 500 x 500 image that was 3KB and a 100 x 100 3KB file)
If anyone could help me figure out what is going on I would greatly appreciate it.