PNG-8, 16 colours, 1.7 kB, Photoshop CS5
I have no idea what you guys are talking about.
Even as PNG-24, which is lossless, it's below avatar size limits (2967 bytes).
What's strange though, is that photoshop thought this image would be 925 bytes before it saved it, but it turned out 1.7 kB.
-edit-
Miko's avatar, 6.1 kB, max quality jpeg.
I had similar results when I was working in Photoshop 8 too, back in the day, so i doubt this is something that's been improved on a lot in the latest version. I've never had any problems with getting file sizes down to below avatar limits.
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