I added an upload button to the add media wizard.
So that when you visit a page like: http://en.wikipedia.org/w/index.php?title=Wikipedia:Sandbox&action=edit&...
then click on the "image" button, then click on the "upload button" in the add-media-wizard, you should get a list of recently uploaded files and a few links to inline upload.
From the inline upload you can upload a local file. Then you can click "insert" to insert the uploaded file to the page. The idea is to make the process fairly strait forward.
This just got developed over the last few days, let me know if you run into issues.
Already on the todo list: An auto-complete category field and multiple language description support to the upload description. Ideally I want to avoid a very long list of things people need to fill out before they can upload content but that of course needs to be balanced with getting as much description info as possible at point of upload ;)
Neil and the Multimedia usability efforts are diving into this problem so I won't focus on that to much.
This builds on mwEmbed AddMedia module, so all the goodies like progress indicators and inline transcoding with friefogg is supported. ( so you can select your cameras h.264 encoded file and insert directly into the article with transcoding, cross site uploading, asset reference and layout handled by the wizard. )
This uplaoder works via an iframe so it can share credentials across a white-list of domains. In the future it would not be hard to add in support for client initiated domain approval ( similar to facebook connect ) .. this would enable a lot of different mash-ups. Obviously the proxy is useful for any widget/ gadget that want to do cross-site api requests that require "post".
Also I should email wikitech-l. If we want to support cross-domain IE interface interactions we need a p3p policy header to be sent out to IE: http://stackoverflow.com/questions/389456/cookie-blocked-not-saved-in-iframe...
peace, --michael