I was going to sleep but need to post this before I forgot about it
By default installation WordPress give you 2 option to upload your files Flash uploader and browser uploader, but if you use wordpress-automatic-upgrade plugins and firefox with noscript/flash blocker when upgrading you will notice that the flash uploader stop working, this is due to 2 SWF that are missing during the upgrading process , the missing SWF is involving our media uploader one.
to confirm it check these files:
make sure these 2 files exist in the folder if not get a copy of these files on a fresh new wordpress installation and upload it the specific folder.
That should enable your flash uploader back