So I may not have a solution but I do have one potential cause -- I had set up Picasa to use my Photostream folders. I was planning on importing to the Uploads folder using Picasa, then manually emptying that out once they appeared in the Photostream (and therefore back on my wife's Mac which is going to remain our main photo repository). I just wanted the ability to easily add photos to her computer remotely, and to have a constant fresh supply of photos of the kids just in case.
Anyway, set it up, it worked great for a while, then after my son's birthday party I stuck the camera's memory card in and used Picasa to import. I had done this twice before, no problem. Suddenly started getting "can't upload photos" warnings from iCloud, and a yellow triangle error icon on the system tray iCloud icon. This is 64bit Windows 7 latest updates, etc.
I got it working again by moving everything that was waiting to upload out of the Uploads folder, turning off Photostream, restarting, deleting the Photostream folders, and turning it back on. Downloads started right away but when I moved everything back to the Uploads folder it all stopped again.
Finally wised up and looked at what was in the Uploads folder and one of the files was a 419mb ".MTS" file -- it's the video format my camera uses, apparently (Lumix GF2). Picasa imported it and dutifully put it in the Uploads folder, but iCloud seems to have been choking on it, not sure if because of size or file format (iCloud helpfully doesn't say). I repeated the delete/off/restart/on procedure and copied ONLY the JPEGs into the Uploads folder and it just finished uploading successfully.
So short story -- don't put anything other than photos in Uploads. I assume Photostream doesn't handle video at all, or at least not .MTS format? Maybe I'll see if the camera can do MP4 but I doubt that will help.
Apple, can't you check the file before attempting to upload and just skip incompatible files? Or at least say something like "Hey, unclean Windoze user, get your dumb videos out of my shiny Uploads folder!".
And in case any Apple people read this, can you make Photostream optional, like let me take all the photos I want on my iPhone, then mark them the same way I do to email or delete and offer a "send to Photostream" option? I'm perfectly happy to do this manually, love the automatic IDEA but in practice it's too much.
And on Mac/Win can you offer an option to treat it more like iOS in that it deletes photos older than 30 days/1000 photos? I don't really want my entire photo history on my laptop since I already have my wife's Mac handling that, but having the most recent photos would be nice even if just for my screensaver. I may set up a startup batch file that kills files in that folder older than 30 days but that's a pain.
Also (sorry for the "Ands" and "Alsos" but I have a lot of ideas!) could you have it automatically delete everything in the Uploads folder as it uploads them? Seems silly to have to clear that out manually since after it uploads it just turns around and redownloads it to the My Photostream folder, duplicating all of my photos. At 5mb each that adds up quickly esp. on a laptop with only a 320gb HD! Better yet, upload, then MOVE the file to My Photostream instead of re-downloading it.
Also, when's iOS 5.1 coming out, REALLY want that delete feature in Photostream -- apparenly Apple software architects have no small children -- 2/3 of my stream is photos of our dog's butt or grass. I could use time waiting in line at the coffee shop to delete those.
(And seriously, why can't you even SEE the "reply" button in these forums until you're logged in? That's taking the minimalist thing too far, Apple.)