CAUTION - I just checked, and the function was not working as of 6:10 PM EST on 7/16/09. I will follow up with Admin.
There are two places to upload photos and that may be causing the issue.
In Galleries, Select Embroidery (not Scrapbooking) and then Select Projects. You will see an Icon named UPLOAD, select that. Then, IGRNORE the icon that says SPECIFIY FILE/URL.
Give your project a name and then follow the same instructions for posting here in the Forum - which is:
After Selecting "Write a New Post" or Selecting "Reply," Select the Film Strip Icon. Press Browse (sometimes twice - and, no, I don't know why) and Select "debgamble's files." Select Upload file and continue to find your photo from your computer. Select Upload File and double click on your photo. DONE!

If you still have questions, please advise. Computers must have everything in a specific order or it will give you unexpected results.
Pat, The Avid Embroiderer
If you are interested in selling your projects, you can determine your costs and profits quickly with my Spreadsheet.
If you want a lot of great information on working easier, faster and more confidently on your computer, check out my Tips and Tricks.
If you want to see my pashminas (that I successfully sell retail) check them out here. I also wholesale them.