If you use VSTS 2008 web test to upload the file, after you record and run the test, your web test fails. That's because when you upload the file , VSTS web test doesn't know where your file is. After you record the test, you need to manually modify your web Request.
If your file path is c:\test.txt, VSTS only knows the file name, test.txt, not the file path: c:\test.txt.
You just change the file path and run the test again. Your test will pass.