billyyo, suleiman will give you a fix for two issues soon: 1) if you allowed pictures bigger than 80 kb to be uploaded then pictures weren't uploaded due to a bug fixed in suleiman's next release, and 2) if you picture was smaller than the avatar-size then pictures also were not uploaded.
have you set $image_dir and made sure the webserver can write to it? You can configure that from the admin panel.
A detail, if you don't have php-gd installed (Fedora, CentOS, etc don't install php-gd*.rpm together with php, make sure you have that) then you're screwed and not notified since
if (extension_loaded('gd') && function_exists('gd_info'))
doesn't have any }else{ die("No GD, no picture!?"); } type statement.