I know I've seen it in ACP. After 10 minutes of looking, I give up.
Upload them to images/avatars (in filesystem not ACP)
I could have sworn I saw them somewhere in acp. Maybe it wasn't an area for uploading, but an area for selecting and applying to different users/groups. I mean I remember seeing the actual images...
Found where I had seen it. ACP > Users > Edit user > Avatar
Thanks for the plugin. It will come in handy.