I had moved my sites to a new server this week and decided to set this box up on FCGI over DSO for sudo reasons to see php owners.
I have another copy of 1.0.4 running on my other site on the same box that i knew was working for attachments. I tested it and the uploader was broke as well.
After reading threads on here a lot seems to be pointing to some FCGI possibilities. I changed the box back to DSO to test and the upload works on both sites now, one being 1.0.4 and the other 1.1 beta 3.
So something in FCGI causes the issue, maybe ownership? I even tried suexec on and off. It's my own dedicated box if you guys need me to test anything.