Peter,
In theory, the absolute maximum file size it can handle is 2 Gb, however, it will often hangs long before you reach that limit, especially if you use a very complex form. It's risky to use files of over 100 mb, for example, without using a data splitter.
400 kb, however, should not cause any problems related to file size. There may be another cause for this problem. Did you check the Watch and Image log files or the service console, and are there any errors? If you resend the file, does it always fail, and always at the same place?
Regards,
Raphaël Lalonde Lefebvre