Can't you just revoke avatar uploading privileges for the repeat offenders? Doesn't seem like that big of an issue all things considered.
We could. Same as we could change a lot of unwanted behaviour around here by consistently applying laid out penalties for misbehaviour, such as Polish spamming in the shoutbox. But that's up to DU and from what I've seen, DU doesn't really want to do it. "Low moderation" and all that.
Funny, I don't recall that being an issue with other sites using this (now outdated) version of Xenforo. You could upload an image way larger than the optimal dimensions and it would get automatically resized everywhere. Don't tell me you lack some essential plugin.
That would be because we're not using the default XF avatar behaviour. By default, XF forces all the avatars to be the same square size, which eliminates the problem I was talking about altogether. Here, this automatism has been removed to keep all the different kinds of avatars intact. (Not necessarily all true since I mostly remember how I've done it on my site, it could be slightly different here.)