Inspite of browsers playing spoil sport,
Sahi now handles file uploads too!
The strategy was to intercept the request in the proxy, read the file off the file system and insert it into the multipart request.
A workaround yes, but it at least works around!
Good thing is, it even records and plays back the file upload.
The file has to be present on that path on the machine running the proxy.
Coming up in the next build ...