I’ve received some complaints about the testbed not working under non-IE browsers, and so I’ve modified the testbed to warn you about using local files. If you’re not using IE, then it is not possible to use the testbed without modifying your browsers security settings.
If you are using IE, you may ‘upload’ any image or file you wish. However, if you are using Firefox or some other browser, you must specify the valid URL of a file somewhere that the browser can access. If anyone has a decent hack around this, let me know! In any case, the testbed checks the filename you pass it and tries to determine whether the file is local or not.
Hope this clears up some of the confusion! 🙂