I thought I'd pass on an issue that I just worked through in the hopes of saving someone else the aggravation. My students were attemping to upload their first assignment, and about half of them were getting 404 errors. The other half were able to upload files without an issue. Students who were not able to upload were getting "File not found" messages. I was unable to determine what was causing the problem with only certain students. Finally someone sent an error message obtained via Mozilla Firebird that said "Request entity too large!".
I checked the settings on the Moodle course as well as my php.ini settings and both were set at 4MB. After a bit of detective work, we discovered that on Redhat Linux, there is a separate php.conf file that has settings for file upload size (which were set at .5MB). So as long as it was under half a Meg, all was well. Fixing this value and restarting the server seems to have solved the issue.
Finally, the 404 error was resulting from the option in IE to "Show friendly HTTP errors" in the advanced Internet options. I suppost the MS folks thought we'd be happier just getting a 404 instead of the real error (thanks alot!)