I think what is happening is that [[!FileUpload]] creates its own form thus you end up with a form within a form which is not valid html and the browser does not know what to do.
As to what to do - you either need to redesign your page so that you can have two separate forms, or hack FileUpload, or write your own snippet that will work inside a form
Thanks for your reply. You're right I cannot use a form within a form. I've changed the FileUpload script and it works fine now