Yes, that shouldn't be possible, it's a security measure. I.e. you shouldn't be able to send random files from user's PC without users explicitly selecting them to be sent.
However, you can monitor the upload, if you design it differently. For instance, you could use URLStream or Socket or NetConnection to send any data you want and to configure the server to respond in a way you need. For example, URLStream provides a read/write stream that you can use for both sending and receiving the data. You could then use it with some sort of a buffer: send the content of the buffer, wait for the server to acknowledge the data was received, refill the buffer, repeat.
EDIT: So I'm guessing we are talking about AIR application (since you mention File)? So, you are probably opening a file using FileStream and wanting to send a chunk of data you just received by using FileReference.upload() - is that correct? Well, then it seems like FileReference cannot do it silently. Still, I would use URLStream to split the big chunk of data you want to upload into, say 100 parts and then send each part after receiving OK from the server script configured to accept it. Usually, file upload is handled directly by the HTTP server, but your case will require some extra work, namely, launching a script that would negotiate "package" size, receive the packages and acknowledge the reception. This may be less trivial for server scripts that might time out, but there certainly must be a solution to this.
Alternatively, you could configure your HTTP server to serve socket policy once it receives a socket policy request, afterwards, you could connect with the Socket and just copy the multipart-form-data kind of request usually sent through FileReference or similar HTML control. (I'd probably choose this way, if it wasn't a shared hosting or anything else that would prevent me from being able to configure the server).
