It did help! Thanks! I made four posts, then tried to upload a small sized pic (lj icon size), and it finally worked. I guess you need to have a couple of posts to be able to upload a pic in the first place.
Hello everyone, I'm having an avatar-related problem as well. Every time I try to upload a picture, it says 'failed to set a new photo' and that's that, no matter the size of the pic. Should I just try Gravatar? I'd really rather not but I will if I must. Thanks in advance!