When you want to open or upload a file from the browser, you are presented with a set of choices for file locations you want to browse to find a particular file. "Downloads" is not an option for this choice, and you can't select downloaded files, or files from your SD card.
In fact, you can't select files that are not either images, videos or music files. What about documents like PDF, txt, odt? Or downloaded archives? Etc. Even if Firefox OS can't open a file (which it can in the case of PDF) we should still be able to select that file from the browser.
That's because the download manager doesn't implement the pick activity that we trigger at http://mxr.mozilla.org/mozilla-central/source/b2g/chrome/content/shell.js#598