I just got off the phone with the hosting company. They tried to recreate my issue by logging into my WP installation and uploading a 900px wide image to the Twenty-Ten header. They had no problem. I rebooted my computer and tried again. I am still having the same results - after I hit the Upload button, I am taken to a screen to crop the image.
Does anyone have any suggestions?? You can see the image they uploaded to the site at http://unitsmilwaukee.com
PS - I just tried this on my husband's computer as well as IE. I had been using Firefox initially and thought it may be a browser problem.