It's under consideration. We're unsure of whether or not we want to support avatars at all, as they tend to clutter up the look of a board (although some of you may respond that this would be difficult as it already looks cluttered as it is). Another problem with loading URLs from another site is that A. that site and image might not be there for as long as that user's posts are available from this site, resulting in a broken image and B. some browsers have security settings that won't load images if they're hosted on another site.
Personally, I'm torn. I kind of like them, but on the other hand, I'd rather this site not look like a 9-year-old girl's Trapper Keeper. It is this line of reasoning that led us to remove the "FUDcode" and "Smilies" options.
Avatars are fun! However I agree, they are abused and maybe shouldn't be visible in the posts. How about allowing avatars in Member profiles? That way if you're interested in someone's avatar, you just check out their profile.
Speaking strictly from my own experience in building a community online, the moment I allowed custom avatars, participation went way up. Many people like associating some personlized image with what they spend time saying.
However, as has been pointed out, it can get ugly. One thing that works well (in my opinion) is to limit the size of the custom avatar to 64x64 pixels. How bad can it be if it's the same size as everyone else's? The forums that really look bad are the ones where you can upload huge custom avatars.
Otherwise, having a preset list of 20 avatars to choose from is a poor compromise. Do you really need 100 people being the jitter cat? Why bother...
In my forums, I've supplied several thousand good-looking avatars in a variety of themes, all 64x64, and then allow custom avatars of the same size. It maintains a more uniform look while allowing people to have some individuality. You can check here if you're interested: [url]http://www.karma-lab.com/forum[/url]
PS: Also, I don't understand why FUDcode (presumably some sort of vB or BB Code) is turned off... No URLs?