Today, the problem with the photos upload is the size of them (about 3-4 Mo per photo) and the bandwidth consumption.
I've find a Flash file upload wich is able to resize the picture on client-side before uploading ! You can see the demo AND THE SOURCE at http://www.adylevy.com/
If you can add the resizing feature to Uploadify, I'm sure it will be very famous !! And it will kill the Java plugin that you can see on Facebook for example.
While that sounds like a cool feature, my main goals is to keep Uploadify lean and avoid bloat. The customization features I've included should give people a good foundation for adding features on their own like the one you suggested. Thanks for the suggestion.