On the development system, the picture upload does currently not work as expected. When I change the picture source to "external", everything works. When I switch back to "local" and then select and upload an image, I still see the Gravatar picture. When I then press "reload", I see the default picture.
Please note that my profile is viewable for "friends" only. If I set it to "public", I can see my uploaded photo. This is quite strange, since I would expect that I can always see my own photo.