I think they've turned off this option. Clikc on Settings (top right) then "edit signature" (in the left bar on the settings page). Down at hte bottom is "signature permissions". Mine says:
Can Upload Images for Signature
No
Can Upload Animated GIF for Signature
No
Since everyone has troubles, I think they have this disabled for all of us. No one has answered my question in the main thread, about whether this will be turned back on or not.