The avatar uploader's been broke for a while now, it's VEEEERRY picky about what you upload and there's no telling what the problem is
Apparantly it's some stupid thing by the dev team of SMF where images created by various image editing programs, including Photoshop are read as dangerous and therefore not uploaded, despite being perfectly safe. Their stupid suggestion is to use other programs instead of the massively popular and successful ones just because their program has a problem with it.
The dev team don't seem to give a stuff solely because they're releasing an entirely new SMF version, which is the cause of the problem since they pinched experimental code from that and used it to update these older versions without testing what it does.