I have a problem setting up jQuery-File-Upload plugin and nginx. I've downloaded and installed nginx 1.2.3, and upload module 2.2.0 from source, here's my config file (names have been changed to protect the innocent):
upstream web_backend {
server 4dc1.domain.com:8080 weight=10 max_fails=3;
server 4dc1.domain.com:8081 weight=10 max_fails=3;
server 4dc2.domain.com:8080 weight=10 max_fails=3;
server 4dc2.domain.com:8081 weight=10 max_fails=3;
}

server {
listen 80;
listen 8080;
server_name domain.com www.domain.com;
error_log /var/www/vhosts/domain.com/statistics/logs/error_log.nginx warn;
access_log /var/www/vhosts/domain.com/statistics/logs/access_log.nginx main buffer=32k;
root /var/www/vhosts/domain.com/httpdocs/website;
# auth_basic "Restricted";
# auth_basic_user_file .htpasswd;
index index.html;

location / {
expires 7d;
}

error_page 404 /404.html;

error_page 500 502 503 504 /50x.html;

location = /50x.html {
root /var/www/vhosts/domain.com/httpdocs/website;
}

location = /404.html {
root /var/www/vhosts/domain.com/httpdocs/website;
}

location /img/ {
# auth_basic off;
expires 10m;
}

location ~* ^.+\.(jpg|jpeg|gif|png|css|zip|tgz|gz|rar|bz2|doc|xls|exe|pdf|ppt|txt|tar|wav|bmp|rtf|js|ico|swf|mov)$ {
expires 7d;
}

location /jsonrpc/ {
proxy_pass http://web_backend$request_uri;
include /etc/nginx/proxy.conf;
}

location /upload/ {
upload_pass @test;

upload_store /path/to/file/store/ 1;
upload_store_access user:rw group:rw;

upload_set_form_field $upload_field_name.name "$upload_file_name";
upload_set_form_field $upload_field_name.content_type "$upload_content_type";
upload_set_form_field $upload_field_name.path "$upload_tmp_path";

upload_aggregate_form_field "$upload_field_name.md5" "$upload_file_md5";
upload_aggregate_form_field "$upload_field_name.size" "$upload_file_size";

upload_pass_form_field "^submit$ | ^description$";
upload_cleanup 400 404 499 500-505;
}

location @test {
proxy_pass http://localhost:8080;
}
}

The html file contains a form with method set to "POST", hence the upload module. Here's the relevant bits of the html file:
<form id="fileupload" action="server/php/index.php" method="POST" enctype="multipart/form-data">
<!-- The fileupload-buttonbar contains buttons to add/delete files and start/cancel the upload -->
<div class="row fileupload-buttonbar">
<div class="span7">
<!-- The fileinput-button span is used to style the file input field as button -->
<span class="btn btn-success fileinput-button">
<i class="icon-plus icon-white"></i>
<span>Add files...</span>
<input type="file" name="files[]" multiple>
</span>
<button type="submit" class="btn btn-primary start">
<i class="icon-upload icon-white"></i>
<span>Start upload</span>
</button>
<button type="reset" class="btn btn-warning cancel">
<i class="icon-ban-circle icon-white"></i>
<span>Cancel upload</span>
</button>
<button type="button" class="btn btn-danger delete">
<i class="icon-trash icon-white"></i>
<span>Delete</span>
</button>
<input type="checkbox" class="toggle">
</div>
<!-- The global progress information -->
<div class="span5 fileupload-progress fade">
<!-- The global progress bar -->
<div class="progress progress-success progress-striped active" role="progressbar" aria-valuemin="0" aria-valuemax="100">
<div class="bar" style="width:0%;"></div>
</div>
<!-- The extended global progress information -->
<div class="progress-extended">&nbsp;</div>
</div>
</div>
<!-- The loading indicator is shown during file processing -->
<div class="fileupload-loading"></div>
<br>
<!-- The table listing the files available for upload/download -->
<table role="presentation" class="table table-striped"><tbody class="files" data-toggle="modal-gallery" data-target="#modal-gallery"></tbody></table>
</form>

I keep getting 405 Not allowed error.
How can I get jQuery-File-Upload and nginx to work together?
Thanks.