I added my symptoms to the tracker and, a few days later, added the fix that worked for me. Thought I should add those things here as well.
Here in student users were able to upload and display profile pictures but the Administrator or Course Creator could not. I checked and unchecked the slash dot argrument and verified that Admin>Security allows users to change is enabled, and the GD extension installed and enabled in PHP.
Our problem arose after an upgrade. The Admin and CC had profile pictures that displayed after the upgrade, but each used the delete option prior to selecting an alternate image. Then, only the Moodle default image would appear for them even though the image upload process appeared to work. I found that the Administrator's original profile image jpgs were in \moodledata\user\0\2 even though they would not display.
Eventually, I deleted the jpgs from the \moodledata\user\0\2 folder. Then, I was able to upload a new Administrator profile image through Moodle's Edit Profile interface and have the image display successfully. The key seemed to be deleting the existing image directly from the folder because the Edit Profile screen showed Current Picture as None so offered no Delete function.
Another thing I've noticed is that in order to change to a different profile image for any user, I have to Edit Profile, Delete the existing image, Update Profile, Edit Profile again to upload the new image, Update Profile, and then reload/refresh the Profile screen to display the new image.
We're running Moodle 1.9.9 on IIS 7.5 with PHP 5.2.12.
Hope this info helps someone along the way. Thanks to all who have taken the time to document their experiences. I've certainly benefitted from your efforts.