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Yeah. You can specify a PHP temporary directory. But like feyd mentioned, it's best to have them stored in whatever temp directory PHP uses, and then move it to where ever you want.
What sort of permission should the folder be having to be able to receive the file? Currently the folder is set to 762 but I still error about permission denied.
Well u can have apache be set as owner of that folder, that would limit it somewhat, but what kind of problems do u expect. Or are u allowing exe files being uploaded on a windows server ? That is a security issue lol.
you have to check the type of the file. Do not rely on the filename or mime-type sent by the browser, both can be faked. Check the actual type of the file using [php_man]getimagesize[/php_man] for more details.. I've posted many many times about this, so search for those.