I have faced this error testing some updates I’m preparing for the automatic merging tool I did and Dynamics NAV came up with this error when I was trying to upload a 120MB file. Too large for NAV apparently.
In my case I was using NAV2013R2 at the time.
To solve the problem you ought to do as follows:
1. Open the NAV Server Administrator
2. Find the parameter named “Max Upload Size” in the “Client Services” fasttab
3. Change that value to whatever you need. The value is in Megabytes. In my case I typed 200 (MB).
(click to enlarge image)
4. Restart the NAV Instance after the change so that the server reads the new setup.