You set the max to 10k. The image you're trying to upload is OVER 10k. Process of elimation, if you want to upload files LARGER than 10k, make the limit larger than 10k.
There is no "set size"; it's whatever YOU as the admin want it to be... I myself would dispise allowing users to upload avatars over 10k... Keep in mind not everyone is on broadband connections, so if you have a bunch of 100k avatars, thats a lot of downloading (and wasted bandwidth); but to each their own.
The size I gave you before (10k, or 10240 bytes) was meerely an example, you need to customize the max size to whatever YOU WANT... And anyone who's attempting to upload an avatar OVER that size limit WILL get the error, it's intended behavior.
