BuddyPress.org

Hello all the good people, I have trouble uploading avatars. I am using BP 1.5.5 and WP 3.3.1, with default buddypress theme with no extra plugins. My site URL is http://pidia.org

I can reach to a stage where we are allowed to browse-upload-crop the image, but after cropping image doesn’t appear as a profile pic, thou it says “Your new avatar was uploaded successfully!”
However gravatars are showing perfectly.
There are folders within wp-content/uploads/avatars/(folder numbers 2,3,4..) but there are no images in those folders.

I did a phpinfo check and found that GD Library is installed http://pidia.org/testgd.php and http://pidia.org/test.php
I have also tried setting my folder permission to 755 and 777 but it didn’t help.
I can also post media in my posts or pages. and they appear in wp-content/blogs.dir/(blog-id)/files/(other folders)
My .htacess file is updated for multisite and it looks like this.

RewriteEngine On
RewriteBase /
RewriteRule ^index.php$ - [L]
# uploaded files
RewriteRule ^files/(.+) wp-includes/ms-files.php?file=$1 [L]
RewriteCond %{REQUEST_FILENAME} -f [OR]
RewriteCond %{REQUEST_FILENAME} -d
RewriteRule ^ - [L]
RewriteRule . index.php [L]

Is there any line I should try adding in .htacess (to enable GD library for WP/BP)

I found even these links have the same problem but none of them were resolved.
http://buddypress.org/community/groups/how-to-and-troubleshooting/forum/topic/fresh-install-on-top-of-wp-multi-site-avatars-not-working/
http://buddypress.org/community/groups/how-to-and-troubleshooting/forum/topic/avatar-upload-error-2/
http://buddypress.org/community/groups/how-to-and-troubleshooting/forum/topic/problem-with-avatar-on-with-a-multisite-set-up/
http://buddypress.org/community/groups/how-to-and-troubleshooting/forum/topic/clean-wp-3-3-1-and-latest-bp-1-5-4-new-members-cant-change-avatar/
http://buddypress.org/community/groups/how-to-and-troubleshooting/forum/topic/member-profile-picturesavatars-question/

The problem stays only with avatars. Normally image uploading works fine. Please go ahead make test accounts and try yourself. You can even peek into my installation if you want to