Regarding file size I agree in essence excepting that 100 x 100 px or less can give a fuzzy avatar. I also like to zoom in to avatars to see the car or maybe another aspect of same. Maybe Simon could offer us a self imposed limit, but well above 100 x 100.
BTW I have no issues using
Imgur as my free picture hosting site.
Unfortunately, the avatar sizing and rules are in-build into the software, so I cannot amend them.
As you've mentioned, the jpeg vs jpg does matter, as does the sizing.
The system rejects larger format sizes to ensure the site skin / spacing works correctly.
As I mentioned above, if you are on ios devices, I would recommend Image Size as a great free app. Furthermore, as RichardV6 states, Imgur is a super free host for simple things like avatar as it does not alter the file type.