I tried this:
var imgPreview = document.getElementById("imgPreview");
imgPreview.src = upload.value;
<input id="File1" type="file" onchange="setImage(this);" /><br />
<img src="" id="imgPreview" alt="Image Preview" height="200" />
This works in I.E. but I couldn't get it to work in Firefox or Opera. I think it has to do with the way that non-i.e. browsers deal with local file urls. Short of this, you can't show the user the picture until it's uploaded and you feed it back to them from the server.