BuddyPress.org

Hum, I’m at a loss as to what is going on in your particular situation.

Jpegs can be processed via the file uploader and cropper. You get a message of success, but then they are not actually written to the blogs.dir directory.

PNGs on the other hand, have issue with the file uploader and cropper. You get a 404 message but then they actual DO get written to the blogs.dir directory.

So, the permissions and ownership of the blogs.dir directory must be okay. You are able to write to this directory.

1. What are the avatar file sizes that you are attempting to upload?
2. What are the sizes of the jpg versus png files?
3. What is your setting for for maximum upload size in WPMU’s backend: “Site Admin > Options > Max upload file size”?
4. Do you have the png file format added to the list of accepted upload file formats? This option is found just above the setting for maximum upload size.

I created a ticket in trac a few days ago that may be of interest, but I do not think that it is the primary reason for your issue.