Upping PHP's maximum file size upload limit:
Your problem: the file upload settings page on your Drupal site (if you've found it) is telling you silly PHP won't let people upload big files, to wit:
Your PHP settings limit the maximum file size per upload to 2 MB.
There's two places that this has to change in your php.ini file; this can also be set in your settings.php PHP initialization variables.
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