Click on User CP. Down the side of the page you will see the control panel. Click on edit avatar. On that page you can upload what ever it is you wish to use for your avatar.
Custom Avatar
If you have a custom avatar and want to keep it as it is, leave the fields below as they are.
Use Custom Avatar
You may upload a new custom image using the controls below. Either enter the URL to the image you wish to use, or use the upload control to upload an image directly from your own computer.
Enter Avatar URL:
Upload an Avatar From Your Computer:
No it doesn't. As a moderator, you have this privilege enabled. On my vBulletin Forum, this option was disabled for normal users by default.
I can understand that internal avatar hosting is disabled (ie, the Wetset servers would have to contain all the images), but you can also enable external avatar hosting where it just links from another site. (ie, you upload a picture on a hosting site like imageshack).
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