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I'm also getting this problem. It worked fine when I installed, but recently it stopped working.
I've checked permission on the uploads folder is 777.
My FTP client (FileZilla) allows me to rename files so I assume this is still enabled.
I am hosted with supanames.
hkats, if the PHP.INI file is set up incorrectly, how do I find out?
Also, where you say a temp file or tmp, do you mean file or folder. I've tried creating both temp and tmp as files and folders, but no joy.
Any help would be much appreciated.