It seems like the latest version of wordpress (2.8.5) does not allow the upload of .flv files. To fix that issue, do the following:

  1. Locate the file wp-includes/functions.php
  2. Locate the function "wp_check_filetype" (line 2228)

Then finally add the. flv mimetype into the $mimes array 
'flv' => 'video/flv',
Done!