hey I put my pic as my Avatar so I just figured it out recently. First you need to make sure that your picture is the right size (100X100 pixels or 19.5 KB whichever is smaller) there should be a resize feature somewhere in your photo editing program. That's how you change the size. Then you come here & go to User CP & clikc on Edit Avater. Scroll down untill you see Use Custom Avater & click so that the dot is green. Then you can find your picture using the browse feature right under that. :-) that should do it.
BAM