I never knew why it was like this, you can have custom skyboxes/prints hosted on the server and clients can download them except you can't do that with faces/torso images. I think it works the same way like the crosshair does.
EDIT: Hold on I just realized something, okay so lets say a server host puts in some custom faces. How would other people be able to equip them, would the image and thumb be downloaded and then shown up in the Avatar Options? Wouldn't that mean that the GUI has to be server sided or something?
I understand now why Badspot never made this feature, you would pick a custom face on one server but then if another server didnt have it you can' t use it, you can't really pick or upload your own faces, only the server host can pick this. It's possible but a lot of things would have to get edited, I think the best way this would work is if it works like in minecraft, images are uploaded to a server however overtime this will occupy a lot of Badspot's disk space.