I take tiffs or nefs and convert to jpeg's in the Photoshop Cs4 "Save As" to reduce under the 2mb limit.
It tells me I am not authorized to upload attachments. But I have uploaded pictures on and off for a year? I have tried to load an avatar and it will not let me do that either.
Avatars you don't upload. You need to have them viewable on a website of your own and provide a link to it (or choose one from the galleries shown).
For regular uploads, jpegs under 2mb should work OK.