Hi, we’re having exactly the same problem with not being able to upload avatar photos, and we have the repeated path in the error message, e.g.: Upload Failed! Error was: The uploaded file could not be moved to wp-content/uploads/avatars/9/avatars/9.
We are on a fresh (< 1 week old) 1-click WordPress installation, with BuddyPress, bbPress and a few other plugins.
Did you have any joy with resolving this issue please?