When choosing an avatar to use there is only one way to get it to work out here. By linking it from an external site. There are number of image hosts out there to use. Here's a few that you might consider:
Before uploading the picture you want to use please check that it follows the guidelines we have on avatars which can be found
here.
When linking you need to use a specific url. Flickr has actually made finding this a little harder than it should have but it still a good image host site. Photobucket and Imageshack don't have this issue thankfully.
To find the url in Flickr you need to click on the image you want to use, the click on image again and an overlay will appear. On the top right will be the All Sizes button. Click that and then choose the size you want. At this point you can right click on the image and copy the image url (eg:
http://farm5.static.flickr.com/4020/4675413365_e5970e239a_t.jpg) This is the easiest way I've found and it means you can still use images that are set to just you privacy.
For photobucket you just hover over the picture and then copy the direct link url. (eg:
http://i26.photobucket.com/albums/c127/Weisseman/WeisseSyiNimraissmall.jpg)
Imageshack puts 6 options down the side of the image thumbnail. You need to click on the top on and it will display info of the picture. There the have a field called Direct which has the url. (eg:
http://img638.imageshack.us/img638/1439/weissesyinimraissmall.jpg)
After obtaining the url go to your profile. Under the Forum profile option on the left there are 3 options for the avatar. You need to use the 2nd option "I have my own pic:". Copy and paste the url there then click change profile at the bottom.
After that your avatar should work

If you're still having trouble please contact one of the staff members and we'll help you out.
N.B
The avatar upload and server stored avatars now work. If you don't wish to link in an avatar you can now just upload it to the server and it should work fine 