Here's a link to Photo How To including avatars.
You will need to resize the picture before you up load it so it will be small enough. I reduce mine to 96X87 Pixels.
You might do a search in the FAQs about how many posts you need before you can have an album. There used to be a set limit but I forgot what it was.
You can also use an outside photo site (like PhotoBucket) to load pictures directly to your posts or for an avatar.