- the first sentence suggests that all copyrighted material cannot be uploaded to the service. In the United States, since all works are copyrighted by default, this would suggest that nothing Americans create can be uploaded.

- it would be a good idea to state that you / dropsauce are the final arbiter of whether uploaded content is acceptable. Unless you are limiting accounts by geographic area, it is conceivable that an uploader might upload content is acceptable in their jurisdiction, but not acceptable in yours or the area where you are hosting the site.

- the last sentence seems to confer a right of ownership upon the uploader that they might not be entitled to.

It might be a good idea to base your Terms of Service upon that of a similar service. Wordpress.com has user-uploaded content on their service, and they have a Terms of Service with a Creative Commons license that you could use as a template: http://en.wordpress.com/tos/