*laughs and puts on his post-Beta knowledge hat*
Due to a stunt wherein my avvy was turned into a wallpaper sized image in the Beta, the following restrictions are imposed on both linked and non-linked images:
1. Only valid image formats are accepted. (.png, .bmp, .gif, etc.)
2. The image must not exceed 125 pixels by 125 pixels in size.
I think that, since then, Natasha has placed some restrictions on avatars involving load times. Here's that tidbit:
...
Disabled offsite-linked avatars. This doesn't really affect the performance of FT itself, but it does affect page loading times and create the illusion of poor performance.
...
So, let's recap:
Your avatar must be no more than 125x125 in size. It must end with a valid extension. And it must either be uploaded or otherwise local to FT.
Con permisso, can I please see the image you're trying with so I can help you better?