This has been covered on other sites even when FP10 was still beta, but sadly I've just ran into this one right now.

Flash Player 10 no longer allows uploads to be invoked from within javascript, and requires an actual mouseclick or buttonpress event from within flash. For the people using tools like swfupload or the (old version of-) YUI uploader, this is bad news, as these tools will simply break.

The fix was made as a security measure against phishing-type attacks, and this has been the behaviour in browsers for as long as I can remember, so if its any consolidation.. it's a good thing really.

The Flash Blog mentions:

Similarly, another possibility is to overlay a transparent SWF button over the HTML content so that again, the user clicking happens in Flash and not in HTML.

Which is actually kind of funny, in a time where 'Clickjacking' is big news, and I would also strongly discourage such attempts to make sure you have a solution that still works in 2009. I'd like to see an example of this, just to test if noscript's clickjacking protection works.

The only real options out there are to simply switch back to good old html uploaders, or do your uploader interface entirely in flash. We'll probably be implementing the former in the short term to work on the latter down the road. The updated version of the YUI uploader also takes the flash approach.