I have a photobucket acct, don't see a specify avatar by URL option in my profile
Hmmm... If I click on "profile" at the top of the page under my username, a drop down gives three options, one of them being "forum profile". When I click on that, the very first option it gives me is "personalized picture". That is where I can select how I want to upload my picture - the aforementioned method using a hosting service and URL being the preferred method.
Because I can't see what you're seeing, look one more time Paul, using the specific instructions I just gave. If those options are not available, I'll have to do some digging for you.