Yes, this problem is a pain in the butt.
As I mentioned above, the solution that worked at the time was to REMOVE the Upload module (not a great solution, is it?).
HOWEVER, with later versions of ComponentArt we tried to re-enable the module and found out a very surprising thing -- the upload module WILL work well in web.config as long as we keep tracing off (that was a very surprising discovery we made after stripping off chunks of configuration from web.config until it worked and then adding them back)
So now, I have a working CuteEditor including uploads on the same system and my web.config contains the following (relevant snippets)
<system.web>
.....
<httpModules>
.....
<!-- componentart upload module note: turning on TRACING in web.config INTERFERES with the current version of the upload module! make sure tracing is OFF -->
<add type="ComponentArt.Web.UI.UploadModule,ComponentArt.Web.UI" name="ComponentArtUploadModule" />
</httpModules>
.....
<!-- componentart upload module note: turning on TRACING in web.config INTERFERES with the current version of the upload module! make sure tracing is OFF -->
<!-- <trace enabled="true" mostRecent="true" requestLimit="1000" pageOutput="false"/>-->
.....
</system.web>
I hope this helps (and that maybe Adam reads this and figures out why turning tracing on messes up the upload module - it would be nice to again be able to use Trace.axd on my site )