Funny, because the image I'm trying to upload is 29.5KB (or 32KB on-disk) - resolution was 500x650.
So, after using some of Photoshop's "Save for Web" brutality, I have pushed my image down to 15.9KB (16.0KB on disk) - resolution is 250x250. Still getting this error message.
I've tried on alternate browsers and alternate computers, to no avail. Is it just me, or has something changed on the server's end that's causing the avatar uploads to fail? I was able to attach the above image, but not upload an avatar.