So the issues would be.......
Preset or any graphic file
Types allowed (jpeg/gifs/animated gifs)
Secure (nothing like a 10mb bitmap going up and down :() and for that matter hyperlinks etc. and other scripting I guess should be removed/dealt with/trapped (phpnuke had a prob with injecting of code...)
Bandwidth
Maybe a limit on the dimensions to keep things tidy
Mods should be able to remove them if seen as inappropriate/or a approval queue (like the email addy idea but based in the site for mods to allow or reject)
Maybe a minium post count before a custom one is allowed
Alec, on your cascading issue, i guess that would be including a bit of code that inserts the avatar much like the current sig stuff... but dynamically. Therefore, a call to the database to get the path/filename then a bit to render it in the php. I guess that then a database issue *could* arise .... hmmm and also a bit of restructuring... and some page rewrites...I am sure this issue could be more techincal than any of us realise! -Apart from Philipp of course