Ever since I upgraded to WordPress 2.5 / 2.5.1 and Ubuntu 8.04 (Hardy Herron) which comes with Firefox 3 Beta 5 as the default browser, I have had sporadic errors with the file uploader in WordPress. Specifically, when trying to upload an image, more often than not, the browse and upload buttons will instantly disappear and will be replaced by the choose files to upload button which does nothing.
There is a lot of speculation as to what is causing this issue but I think it is more of an Ubuntu 8.04, Flash, Firefox issue instead of a WordPress issue. So if you have the latest version of flash, tried resetting permissions on the uploads and wp-content folder, upgraded and or deactivated your plugins and implemented the mod-security fix and the issue still persists, you may want to try this. In Firefox, go to (Tools—>Add-ons—>Get-Add-Ons—>See All Recommended Add-Ons) and then scroll down to the Flashblock plugin and click Add to Firefox.
Once downloaded, restart the browser and the plugin will allow you to upload using WordPress’s file uploader with one caveat. You will only be able to upload one item at a time, at which point the uploader will revert back to an error state and you will have to close and open the window. Basically, the Flashblock plugin lives up to its name and it blocks flash. Furthermore, it replaces flash with HTML alternatives which means the flash uploader in WordPress will render with the browse and upload buttons intact. When you click the browse button, you are effectively reactivating the flash uploader but in this manner you are able to bypass the error. It sounds tedious but it actually only results in 2 additional clicks per image upload that in my opinion is worth it until a permanent solution is developed. Especially since this keeps the new interface intact.