In your "Control Panel" on the right side about halfway down the page are two boxes; one to upload an image from your computer as your avatar, and right below it is the box to put it in based on a URL.
As for the "X", you know, when an image doesn't show up but the "X" does. You maybe seeing the image as your avatar because your computer has it stored in the temp files. When a web page loads, depending on how the computer settings are, the computer will look through the files it has stored before pulling the file/image from the web page it's at. By default, that is the way most/all internet browsers work.