Gmdata, there is a bug that has disabled the upload avatar function on one of the .com servers.
The problem is reported to the Webmaster, but it may take some time before he looks into it, as there are more urgent things to fix first.
Meanwhile you will have to do with the remote Avatar option; upload the images to imageshack or photobucket, and link to them through that "box".

Just keep in mind that the automatic size rules don't apply there, so you have keep an eye out for people who use far too big avatars.
FoxLeonard