The same story.
Solved with manual “downgrade” to 1.1.7 files in following places:
root_folder/skin/adminhtml/default/default/media/*.swf (all the swf files)
root_folder/app/design/adminhtml/default/default/template/media/uploader.phtml
can not localize the buttons (values stands in english, need other languages)
Please, boys!
If you make upgrade, please, check all twice! So many production servers, so many trouble.
Actually you just have to take the /skin/adminhtml/default/default/media/uploader.swf from 1.1.7 as the other ones haven’t changed :
http://www.magentocommerce.com/download ("Release Archives” tab)
I fixed this problem by having my webhost disable “extra web security” - it was actually a setting in my Dreamhost domain utilities. It seems that the mod_security was giving me a problem. Now I’m good to go using Flash 9 ("if it aint broke, dont fix it!")