It could have to do with the file size and not the actual file extension. I got the same exact error 2 nights ago while uploading a screenshot. I had saved it as a high quality jpg and had tried uploading it through both pages multiple times and getting the same error you are getting. I took the file and resaved it at a slightly lesser quality which shrunk the file size a bit and then reuploaded and it went through on the first try.

Sorry been MIA ( my daughter kidnapped me for dinner). I am actually using Flash 10 but was having the same issues with 9. The upload completes with the error message. I am on wireless Internet with Cricket. It is faster than dialup but much slower than cable.  I have noticed that it is more prevalent when the file size is large, but I really hate submitting less than high quality work.  I will resize the JPEGS and try to resubmit and post back here with the results. Thanks for trying to assist!

Thanks CarGuy but as stated originally, I do have Firefox and did try that route before posting here. (No flash in Firefox)

glad that helped but also to clarify:

Now I don't know what the max file size is for submitting walls but with some of the wall packs out there I'd imagine it is set pretty high. So I don't think you need to submit the actual zip with a lower quality work. I think it is just that the preview image that is set to a much lower allowable file size and that is what causes the problem.

Along those lines it would be nice (maybe with the upcoming update of the site) if it gave an accurate error message(i.e. if the file size is to large it tells you that instead of telling you it is the wrong format) when things like this occur.