Unfortunately nginx doesn't work with the mup right now. Nginx always buffers the upload to disk before passing it to mongrel. So by the time mongrel getr notified, the entire upload has already taken place. The author of nginx is aware of this and is going to either allow pass thru uploads or implement an nginx upload_progress module.
For now you have to use another form of load balancer to send upload requests directly to mongrel. Since the file upload happens in an iframe, the trick I have used is to run one mongrel on a higher port to handle the uploads. Since it gets used in an iframe the user won't ever see the port number. And if you need ti to work through firewalls and you arent using ssl you can run the upload mongrel on port 443 instead of ssl. That way no firewalls block it. Then that mongrel just redirects to the normal mongrels to finish up the upload.
Nginx gets updated very often. So I hope there will be a way to do this with nginx very soon.
-- Ezra Zygmuntowicz-- Lead Rails Evangelist
-- Engine Yard, Serious Rails Hosting
-- (866) 518-YARD (9273)