Filenames are something to consider. For instance, allowing something called ../index.html is probably something you don't want. Checking mime types and file extensions is one thing, but consider generating a new file name in the script instead of trusting user input might help security if the file name doesn't matter.
Re: security issues for allowing images to be uploaded to the server
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The way this will be set up, there will be a fixed path to the image file, and the new image will be named by the script, probably by timestamp, so I don't think there is an issue (though I always stand ready to be corrected(:)
Thanks, glad you mentioned it ...