Right, I think this is a bigger problem that I thought, I've tested another client trying to upload and am having the same problem.
Here's what I've tried so far:
Run HFS on the original client that I was having problems with and uploaded the file I was having problems with from the original HFS server - worked fine.
Moved the new HFS file system to the original server and tried uploading the same file from the original client (running the new file system) - failed.
Connected to the server (running the new file system) from another machine (new build - IE7) - failed.
I did think that it could be something to do with flash version 10 as per:
http://www.usefulconcept.com/index.cfm/2008/10/30/KTML-File-Uploads-Hang-in-IE7-with-Flash-10-and-How-to-Fixand
http://www.centernetworks.com/flash-10-uploading-swfuploadBut after updating the original HFS server to flash 10 I can still upload the same file to HFS running on the original client PC (also flash 10)
I have also tried applying all windows updates to the Original HFS Server and am still in the same position..
I have noticed that I can't upload the file to gmail using IE either (but can on the original HFS server) and disabling the flash plug-in in IE allows gmail to work but not HFS...
IE7 and IE8 act the same (the only thing with IE8 that might help is that if I try to upload to gmail from IE8 it appears to work but comes up as C:\fakepath\filename.xxx instead of the correct path - this is with Flash enabled and disabled)
I'm kind of out of ideas now and would apreiciate any input. HFS would be a really useful tool for us but our users are not really up to fiddling with setups - it needs to "just work".
Apologies for the long and rambling post.