There’s been some amazing errors in wordpress, and it does not happen to all! HTTP error on media upload is just like them. It doesn’t happen to all. But if it happens to you, it will almost kill you to fix it, at least will kill lots of your valuable time!
Here is a quick solution for this provided by wordpress developers.
Server Access Control based on Authentication
If you’re using Access Control based on Authentication on your Webserver (often known as htpasswd, Basic Authentiaction, password protected directory or similar), WordPress is not able to handle it for Flash Uploader, Cron and XMLRPC. Related files need to be excluded to work. Keep in mind that this might break your security considerations.
# Exclude the file upload and WP CRON scripts from authentication <FilesMatch "(async-upload\.php|wp-cron\.php|xmlrpc\.php)$"> Satisfy Any Order allow,deny Allow from all Deny from none </FilesMatch>
Hope this will help you!