It seems that nginx buffers requests before passing it to the updstream server,while it is OK for most cases for me it is very bad :)
My case is like this:
I have nginx as a frontend server to proxy 3 different servers:
#3 is the problem, right now what I have is that nginx buffers all the request and then sends that to the file upload server which in turn sends it to cloudfiles instead of sending each chunk as it gets it (those making the upload faster as i can push 6-7MB/s to cloudfiles).
The reason I use nginx is to have 3 different domains with one IP if I can't do that I will have to move the fileupload server to another machine.
As soon as this [1] feature is implemented, Nginx is able to act as reverse proxy without buffering for uploads (bug client requests). It should land in 1.7 which is the current mainline.
[1] http://trac.nginx.org/nginx/ticket/251
Update
This feature is available since 1.7.11 via the flag
proxy_request_buffering on | off;
http://nginx.org/en/docs/http/ngx_http_proxy_module.html#proxy_request_buffering