The applet retrieves the properties file with an HTTP request. That obviously means if you attempt to load the applet from a local file system path instead of first placing the files on the server the properties file will not be read.
If you have correctly placed all the files on the server and still find that the configuration is not been retrieved, please examine the webserver log file and the MIME type configurations. Chances are a MIME type mismatch on your webserver prevents the file from being delivered correctly.
You can tell the applet to look for the thinupload.properties file at an alternative location with the aid of the props_file HTML parameter. More information here ...