It turns out that in order to upload a file that is mapped to an application extension, you have to enable script source access on the web site. Luckily for us, this is the site that developers use to upload data and not the live site. It is fully secured with windows authentication and SSL, but I wouldn't recommend this for live, production websites.
Say it with me: Excel is not a database.
You're running up against the design limitations of the software: it's only got so much ability to store transactional data, so when multiple people are writing to it, it has to store a frickton of information in order to reconcile. You have so much data in it, that the transactional copies are HUGE.
Microsoft assumes (correctly) that if you have that much data, it's stored in a database, and you're just using Excel as a front end.
If you're going to work like that, you should at least knock together a little Access database. It will save you a world of headache, because it's meant to WORK like that and Excel just isn't.
@Josh: Yes, it absolutely IS leaking. When you share a document, it has to keep track of the modifications done by every user...I'll call this "transactional data" but you can just think of it as history. Since there is never an "official" version, it keeps keeping track of changes, and the document bloats up faster than Kirstie Alley in a doughnut shop.
It's by design. Someone who is an excel guru may be able to tell you how to make it stop, but the best solution is just not to use excel for data that's being constantly maintained. It's not really what it's designed for.
I am sympathetic to your problem, but it's a better solution to explain the problem to the higher-ups and work out a new procedure, than it is to try and prolong an unfortunate hack.
@Josh: If you just want to shrink it once, temporarily, copy all the data, and paste it into a new spreadsheet. THAT will kill all the metadata, guaranteed (make sure you don't select the whole sheet, but only the part with data in it) But this is a temporary solution at best.
Best Answer
WebDAV doesn't allow the same kind of file locking mechanisms that a network share allows. Network-share file locking has many different types of locks which can tell other computers that this file is opened by other machines and if oplocks are available (which they are on your share) even allow some communication between the various machines with that file open.
This rich locking environment is not available with WebDAV. If I'm remembering right, WebDAV has a single LOCK flag which makes it function a lot like how MS-DOS treated locks. It is for this reason that Microsoft made Sharepoint work the way it does, rather than leverage simple WebDAV.
So no, WebDAV will not work just like a network share.