Success!
There are three different ways to upload your avatar:
Upload from your machine:
Upload from a URL:
and
Link off-site:
I had tried the first and second with no luck, but just now thought to try the third way and it worked. The second way says "Enter the URL of the location containing the image. The image will be copied to this site" and the third says "Enter the URL of the location containing the avatar image you wish to link to."
I assume the first and second methods make a copy of the image and store it somewhere on the board whereas the third way merely links to an offsite location. There would seem to be something wrong with the function that copies the images to the board then.
If that helps.