Actually I am still seeing some sort of funkyness.
For some reason I am still seeing a default image even after a user changes their profile picture. I have tried flushing caches etc, to no avail.
I got a bit further and it seems to be related to the compact view. So in Standard view the image shows up fine. But in compact view I see a default image. It seems that the compact view is using the following API:
https://www.example.com/api/v3/users/837kyk8yi38d3jpwx8zpthzhjg/image?time=undefined
With time=undefined the image returned is the default. Removing that gives the saved image:
https://www.example.com/api/v3/users/837kyk8yi38d3jpwx8zpthzhjg/image?
Could this be a bug?