I have the same problem. I got round it by uploading it to my free webspace, but its only a matter of time before I exceed my allotted bandwith. It shows up here, so, I should be able to upload, but it didn't. Anybody know why?
This is the way i got my avatar picture.
I found a picture that was a jpeg file
Then i right clicked on the picture, and clicked on "properties"
Under properties you see the url code
highlight the url code ([url]http://www.etc[/url])
then right click the highlighted code and press "copy"
go to the avatar screen
paste the url in the correct box (not the one that has the browse button)
Go to the size window and make sure it is set to 128x128
you should be all set
Jesper - you couldn't upload yours because the file is too big. They can be a max of 20 kb, and your tank is 71 kb. Animated gifs are always big, because they're really about 4 pics built into one.
I suspect file size is the problem some of the rest of you are having, too.
Try resizing the pic BEFORE you upload it. Make the longest side 128 pixels and save it that way (give it a different name if you don't want to lose your original). High resolution can make a file big, too.