I suspect the code to display the default when nothing else is saved/specified is probably in the display portion of the code.
make sure your 'use_default' is set to 1 near the top
and then compare yours to this:
// Display the avatar image
function avatarupload_display($id, $force_db=0, $class='avatar')
{
if ($a = avatarupload_get_avatar($id,1,$force_db))
{ if ($a[1] && $a[2]) {$dimensions="width='$a[1]' height='$a[2]'";}
echo "<img src='$a[0]' $dimensions alt='$a[4]' class='$class' />";
} else {
$config = new avatarupload_config();
if ($config->default_avatar['use_default'] == 1)
{
// Use a "genric" default avatar
echo '<img src="'.$config->default_avatar['uri'].'" width="'.$config->default_avatar['width']
.'" height="'.$config->default_avatar['height'].'" alt="'.$config->default_avatar['alt'].'" class="'.$class.'" />';
} else {
// Or use Identicons instead. New users will have an identicon automatically
// created when they join, but this is for existing users with no avatar.
felapplyidenticon($id); // create identicon
// now fetch it from the database
if ($a = avatarupload_get_avatar($id,1,$force_db))
{ if ($a[1] && $a[2]) {$dimensions="width='$a[1]' height='$a[2]'";}
echo "<img src='$a[0]' $dimensions alt='$a[4]' class='$class' />";
}
}
}
}