So it shows your image under "Your Current Signature Picture" but isn't showing up on posts?
If so, it just sounds like you need to click "Insert Signature Picture" or manually add [SIGPIC][/SIGPIC] to your signature to get it to show up.
Let me add this though: it's much easier if you just host the image on an image hosting site (such a tinypic or photobucket) and copy the link it gives you. The image quality is usually better as well.