You have to go to your User CP (at the top of the page, next to the North Stand Chat logo) go to edit options, then change avatar at the bottom of that page.
The picture has to be on the internet somewhere, find the picture you want, right-click on it, select properties and copy the web address of the picture. Then paste it into the space on the change avatar screen.. and hopefully it should have worked!
And if you understand all of that... you've done better than me!
(oh, and the picture has to be 100x100 pixels or smaller and under 10K...)
NSP is actually the site to be at but this one's not bad either.
As for your picture, it needs to be hosted somewhere on the internet before you can make it your avatar (little picture thingy). If you need that doing, feel free to email it to safewayseagull@yahoo.co.uk and I'll put it up for you.