There's not an Option 1 and Option 2 showing right there?
If not, go back into settings, then click "general settings" on the left. Scroll down towards the bottom of the page and look for this:
[h=3]Miscellaneous Options[/h]Message Editor Interface:
- Enhanced Interface - Full WYSIWYG Editing
Put a dot in the "enhanced interface" circle, and scroll to bottom and click save changes (i think that's what it says)
Then reopen where you found the "use custom avatar" before, now do you see Option 1 and Option 2?