I actually experienced this problem myself and it took along time to figure out why the Avatar option was not showing in my profile.php page of my forums.
I checked all the settings in the administration panel for phpbb and they were fine i even triple checked them.
I searched google for an answer and found that many problems users of phpbb are experiencing are down to folder permissions on the avatar folders not being correct, for example user's just got red cross's after they uploaded them to there forums.
This did not help me at all as i was not even given the option for avatar upload on the profile page, it turned out after deep inspection and testing that there is a file called profile_add_body.tpl that is located in the templates\subsilver\ folder that controls this option amongst the others that are displayed.
All's i did was download a fresh copy of phpbb from the authors website and replace this file with the new one and it worked fine after that! , hope this helps someone else instead of pulling your hair out.
