there is a setting which 'may' override the php.ini settings, depending on your hosting provider.
add this line to the top of the upload page...
<?php ini_set("memory_limit","64M"); ?>
Try changing the number to a higher one if you have problems, but whatever the setting, the server may time out if the file you wish to upload is too big.
i recommend setting a 2mb maximum file size, which is plenty for web images