I've enabled a test configuration of MediaWiki's upload-by-URL ability on http://test.wikipedia.org/
The default configuration limits URL uploads to sysops, so for now you’ll need to be a sysop on Test Wikipedia to try it out. If everything seems fairly problem-free we’ll start rolling this out a bit more widely for Commons and other sites.
In addition to being able to handle large files without an ugly manual download+reupload, the upload-by-URL functionality is also needed for future-facing work Michael Dale is working on to allow an on-wiki media picker to fetch freely-licensed files from Flickr, Archive.org, and other places.
We may want to consider improvements to UI and workflow, but it seems to at least work. :)
More at the Wikimedia technical blog: http://techblog.wikimedia.org/2009/03/upload-by-url-for-testwikipediaorg/
-- brion vibber (brion @ wikimedia.org)