Most often, when your ini upload settings are fine, the other problem is the temp upload directory. By default, this is the /tmp folder. If you do not have enough space in your tmp directory or there are other limitations, you may run into this issue.
Check your php.ini setting "upload_tmp_dir" - also check the location where that is set.
Perhaps, if you're in a shared hosting environment, you're not allowed that much room in tmp. You may want to change that directory to a different directory in your home directory, but NOT publicly accessible to the web. Of course, don't forget to use move_uploaded_file() to make sure that the processed file isn't duplicated in your home directory AND in wherever you store it.
