dfunkydog
The following solved my problem
* create uploads folder manually, CHMOD to 775
* enter Full URL path to files in settings->misc
* add .htaccess with SetEnvIfNoCase Request_URI PATH-TO-WORDPRESS/wp-admin/async-upload.php$ MODSEC_ENABLE=Off
hope it helps you out
Strangely, first image was successfully upload but next one get error after crunching. Then changed htaccess i get internal server error…
everyone know this ?