I have the same error, as do my students. Kinda lame to have to pass around a memory stick for them to submit a modestly-sized file.
I am using 2.5.1 and recently set up a 2.6.2 test environment. Same problem in both.
Mine is a web-hosted site. I have increased the time as above but, regardless, things seem to pop at around the 30s point of the upload.
I did set up legacy files repository in 2.6.2 and was able to store a backup of a 2.5.1 course there then was successful in using this backup file to restore in 2.6.2. But, my concern is not with self, but with students who cannot upload properly.
Maybe related: my course backup file exceeded about 120MB, the cron job that does automatic backup reports failure hourly (the frequency of crom job) but (usuallly and a day late) completes a backup. Not sure how trustworthy the backup is since backing up (over time) an active course won't result in a "moment in time" backup. I tried backup manually in maintenance mode, same issue.
My service-provider has escalated to second level support tech; is this, potentially a PHP version issue? (5,4 is my current version) though I tried rolling back to 5.3 with no difference....)