I am having the EXACT same problem. Any solutions? I checked all of my system parameters to make sure the limits were set high enough to accommodate larger files. When I look at the system status built in to the Newspaper theme, all the boxes show up GREEN indicating that my system meets all requirements.

I thought it was a Flash problem at first but when I choose to install the demo without the sample content, the flash pop up box works fine.

For all of the future users who are searching through this forum for an answer to the same problem, can you please post a summary of your solution instead of just saying “solved”?