Limit is more width/height of the image. We have set limits on 125x125.
Way around it is to upload your avatar to another site and link it to your profile. Forum software will use that link and resize it on display.
I shrunk the image to no more than 125 pixels wide or high and tried to upload it, and got this:
An Error Has Occurred!
Your attachment couldn't be saved. This might happen because it took too long to upload or the file is bigger than the server will allow.
Please consult your server administrator for more information.
(Just for the record, the resized image was 104KB on my Mac.)