I'm using Q3 beta, but it does the same thing with Q1. It works locally, but when ran from IIS7 and when I try to upload something I get a 404 error message. The upload dialog shows up and I can actually upload small files (a few KB), but it fails for larger files (between 1 and 2MB) although the limit is set to 4MB. Interestingly when using Fiddler a few calls are made to Telerik.Web.UI.DialogHandler.aspx?[a bunch of parameters], but after 4 requests the 5th fails with a 404.
I'm out of ideas as to what to try....
Thanks.