I can report the same path issue with 3.0 running bp 1.2.3 in multisite mode. It is not saving the avatar in the /blog.dir/1/ path as it should. Bp is installed on root level of site.
I also see the following server error:
PHP Catchable fatal error: Object of class WP_Error could not be converted to string in /wp-content/plugins/buddypress/bp-core/bp-core-avatars.php on line 281