Same for me, but another problem I had that I've never seen before is that once the photo uploads failed, the folders stopped showing up on my own computer, in the upload window of this web site. It's there on my own windows explorer, but the 'browse' button pops up the folder hierarchy but the 'my photos' folder is missing, along with every one under it that's on the path to the photos I'm trying to upload. Strange.
I changed the name of 'my pictures', and they all came back. Changed it back, and they're still back. Freaky.
Oh, and I've tried to upload several formats (jpg, png, and bmp), in case one format wasn't playing nice with the server, but still no luck. My first try was a pic that was too large, and it told me as much, but after resizing, same error code as the OP, no matter the format or computer.
And since it's important to Heath, I'm on Windows 7 x64 on this machine, and Windows XP on my old laptop. Same problem, at least with the inability to upload.