One place to check is:
Control Panel » Display Options[-]Topic Display Options
Enable, Show User Avatars?
Next:
Control Panel » Site Permissions
Can upload an avatar , set to 1 for each desired group
Next:
Control Panel » Profile Settings
Avatar Upload Storage Directory: set a path.
And make sure you use the test link directly underneath.
Very important task.
In fact you need to set all of the fields in this page.
