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UPDATE: Scroll a little further down for the picture gadget...the html gadget and the Yahoo avatar no longer play well together...the html gadget works for other things, jsut not Yahoo avatars!
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INSTEAD OF SELECTING THE HTML BOX, CHOOSE ONE FOR SAVING AS A PICTURE...the html feature for the avatar no longer working in Blogger.
Be sure on the various boxes or pages in your blog you click or your avatar will not be added.