Tried it after I saw Raven's announcement that groups are back and it doesn't seem to have worked. I made a banner and an avatar in WIndows Paint and saved them as .png files. Could be a problem with image sizes, perhaps? Avatar has to be 80x80 pixels and banner 80x220. I made both in 5:1 scale, so avatar is 400x400 and the banner is 400x1100. They should scale down properly though, so I'm not sure. The site didn't indicate any error, the images seemed to upload fine straight from my desktop but the avtar didn't change.

 

My group avatar updated. Perhaps it was an issue on my end. Regardless, it's resolved.