User blog comment:Kirkburn/Technical Update: April 22, 2014/@comment-24319470-20140427052706/@comment-126761-20140428140600

I think you have actually just been hit by a slightly confusing aspect of that dialog. As long as the preview of your new avatar changes, the upload has been successful. Clicking 'Save' should use the new image. I've updated Help:Avatars to help make this clear.