https://bugzilla.wikimedia.org/show_bug.cgi?id=55205
--- Comment #4 from Kunal Mehta (Legoktm) legoktm.wikipedia@gmail.com --- I talk to Wikia and another user tested an upload and it work just fine. The difference being they were using python 2.6.5. I then found an older 2.6.5 windows installer and tried myself and it worked.
So apparently there is something wrong with the interaction with 2.7.2 and upload.py that is causing this error.