Hi, I've been able to use the /_vti_bin/imaging.asmx web service to upload picture files directly from infopath into a picture library, I'm pretty sure that either the /_vti_bin/Lists.asmx or /_vti_bin/Copy.asmx web services will allow you to upload documents in a pretty similar fashion. IT is definatelty achievable through using the web services.
In my form, I also check if there is an image file with the name expected and inform he user that the image is on file by using a secondary data connection. I've uploaded a couple of screen dumps to show what that portion of the functionality looks like.
I'll have to take form and extract the relevant bits if anyone wants to see how it was achieved.... It wasn't an easy thing to do.
More than happy to have a go at creating a method to upload documents if you need a hand?
As to the upload limit, I'm not aware of a limit that Infopath would impose (although there may be one), yet there is a system setting in SharePoint that limits the size that uploaded documents can be. Maybe this setting is hampering you?