Take a look at the wsssdk.chm...........

Here is the private method that I use to add images from the 12 Hive to
an Image Library:

private static void AddImageToList(SPList list, string  imageName)
{
// Add an image from the 12 Hive to the
string imagePath = @"C:\Program Files\Common Files\Microsoft
Shared\web server extensions\12\TEMPLATE\IMAGES\";

try
{
FileStream stream = File.OpenRead(imagePath + imageName);

byte[] content = new byte[stream.Length];
stream.Read(content, 0, (int)stream.Length);
stream.Close();

list.RootFolder.Files.Add(list.RootFolder.Url +
"/" + imageName, content, true);
}
catch
{
// Do nothing if image is not found
}
}

The issue I am having is more that the file  does not exist. I want
to create  the file (in memory  if possible as production enviroment
trust level does give me access to file system), and then upload  it
to a document library. The upload part is straight forward. I just
can't figure out how to create the file in memory and then get a
handle on it to pass to sharepoint for upload. More of a C# question
than sharepoint.

Will wss_minimal give me read/write to the 12 hive? if so i could
write the file out to there, upload from there to doc  library, and
call some clean up to delete the temp file.

I am doing this within an Outlook Addin that stores the *.msg file  from
outlook - I create  a temp dir somewhere on the harddrive where the user
account can access the file. Then I push the file to the Sharepoint
document library, then clean up the file (delete the file & directories)
from the harddrive. This has worked well on several product implementation
without issue.

The Add method (list.RootFolder.Files.Add) is passed a stream object.
So, you can create  a stream object, fill it using a stream writer and
then pass it to the Add method.

Storage on disk is not required.