I just joined the forum and have encountered the same problem with avatars. I tried to upload mine and got the following error message:
The form you submitted contained the following errors
* The filetype you are attempting to upload is not allowed
Images must be one of the following image types: jpg, jpeg, gif, png
The image I tried to upload was a jpeg type and well within the size and dimensions limit. I had the same problem trying to upload a member picture.