If the favicon is turned off, files are not uploaded at all.

In Drupal 5.1, if you turn off the favicon in the theme that you are using, the upload function in nodes does not work anymore. It allows you to select a file, and it looks like it uploaded it, but when you submit the node, the attachment doesn't exist in the files/ directory and when you go back to edit the node, it is as if you never uploaded it in the first place.

As soon as you turn the favicon back on, the problem disappears and the uploading works fine.

The following posts are related to this issue:
http://drupal.org/node/121467
http://drupal.org/node/119374
http://drupal.org/node/81613