Ah when I said it didn't work on local storage - I just noticed I had commented out the S3_* variables, but hadn't reset UPLOAD_METHOD back to "local". I have it working on local storage now - so it is an issue with my bucket. I also had S3_DOMAIN defined incorrectly. Now I"ve correct those issues, I now see 404 errors in my s3 access logs - so starting to make some progress.
I saw in a previous post that you stated that using local storage didn't scale well - can you elaborate ?