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Well, say I pick img0.gif for my avatar, which is a system specified avatar. I use it for a while, I'm bored of it. I decide to now use img1.gif instead, and go back to edituser. At the top it says your current avatar will be deleted (img0.gif). I pick img1.gif, and press submit. Now, I go in and check to see if img0.gif is still available. Nope, permanently removed.
I have the latest version available. I'm assuming that it does, in the edituser.php script it seems that it is deleting the image previously used...