Using a Mac with firefox or safari, the uploading images using flash was dying on
HTTP error. An error occurred in the upload. Please try again later.
in firefox and http error when crunching with safari.

The solution that worked for me REQUIRES two steps.
1. modification of .htaccess file
2. replacement of swfupload files with updated versions
first, the .htaccess file must go in the wp-admin folder

the contents must contain:
AuthType Basic AuthName share Satisfy Any Order deny,allow Allow from all SecFilterEngine Off SecFilterScanPOST Off
What this does is disable the apache security module when uploading files. It does not work for
me without it.
Second step. Download the latest version of swfupload. For me this was SWFUpload-Core v2.1.0.Release.zip

Find the folders in word press:
swfupload

replace the files
swfupload/plugins

replace files
Upload new files from SWFUpload v2.1.0 Core folder

Remember to delete the browser cache because it may be using the old versions of the files stored there.