check the permissions on the php(not phpBB) installations tmp folder. When a php script uploads a file php will create a temporary file in the tmp folder, if it is not allowed to do this the upload will die, so you need to check this first
I'm new at this.
I don't seem to have an avatars folder.
I haven't downloaded any avatars.
Do I need to have avatars in stock in order
for users to be able to upload avatars from their pc?
No. You should have an avatar forlder in the images folder. If not you need to make it.