If you want to have a photo for your blogspot profile, you will have to host your photo on the web with a photo hosting service like photobucket . This will involve registering for an account. If you register for a free account, you have to log into photobucket at least once every three months, otherwise the account will be deleted. Even if you register for a paid account, you will have to keep your subscription. This is a work around to get your profile photo hosted by Blogger.
Upload the photo into an empty post specially created for this purpose. If you don’t want to have the post in your current blog, you can always create a special blog for this purpose, or post it to the current blog and resave it as draft after you have obtained the url for the photo. After you have posted the photo, go to that post on the web and click on the photo.
This will take you to the page on the web where the photo is hosted. Copy the url from the address bar. Sign into Dashboard, click the EDIT PROFILE button on the top right hand of the page. Scroll down and look for the place to enter your photo url (see screenshot above). Paste it there and you are done. This idea came from Taz Kwok.
Update 27 March 2007: Things have changed with the introduction of New Blogger. Now if you delete the photo, it will be gone from the Web. Also, if you click on the picture to the page displaying only the photo, you can’t use the URL in the address bar of that page as before. You will have to click VIEW in the menu bar, then select PAGE SOURCE to get the source code. \
You will have to search for the real URL of the photo from the source code. For a fuller description, go to Testing uploading of profile photo in the New Blogger (formerly Blogger Beta and Getting New Blogger (formerly beta) to host your photo for the profile, sidebar, etc. (click “BACK” button to get back to this page).