Got this reply to my query from Aavo - have posted it here for others to comment on or use if they have the same problem. Havent got it to work here yet but that may just be me

Yes, I found - in squid.conf.
(reading squid.conf.default - very good for "Readme").
Adding this line to /etc/squid/squid.conf and restarted squid - OK!
request_body_max_size 0 MB
If this is not definered, default is 1MB! (0 means no limit ; I have set limit 10MB in php.ini.)
Then added this line in template
/etc/e-smith/templates/etc/squid/squid.conf/30attachment_limit to make
this permanent...
Or, make custom template recommended... (The nr. of the file "30..._..." is
not critical).
Aavo