Some clients may experience problems uploading product pictures because their website is closed on apache password. We usually suggest trying different browsers, otherwise you can disable password protection (see below) and test product upload while website is open to search engines.
However you can disable password protection of your Magento directory. To do this, use windows notepad or command line text editor to open ".htaccess" file, which is located in the Magento root directory on your web server:
cd path/to/your/magento/ vi .htaccess
and then replace the following line: