I was using v1.2 and just installed 1.4. Same error.
There is a problem with paths on my localhost test server. WP is not installed in the root directory, which may be part of the problem. Error that shows up after trying to upload a slide:
Unable to open 'H:\path\to\wordpress/wp-content\uploads\combo-slideshow/wp-content\uploads\combo-slideshow\image-thumb.jpg' for writing: No such file or directory in H:\path\to\wordpress\wp-includes\media.php on line 455
Notice "duplicated wp-content\uploads\combo-slideshow" in the path.