Jason,
Figured it out.
The problem itself - the HTTP 401 error seems to stem from having an .htaccess configuration where we are using a username/password to block access to the site while it's in development. Seems that in some browsers, and some versions of Flash are not liking that authorization. Basically even though the browser is authenticated, the flash player isn't, therefore the upload fails. No idea why this effects certain browsers and versions of flash.
The reason I didn't see it on my other DEV site is because at the time I was using a IP block, not a username/password auth. I just switched the other site to username/password and it failed to.
Issue resolved. We can use the HTML uploader until the site goes live....and then swtich it back to flash once the auth is removed.
-Kevin
LM