I'm pretty sure this worked before I installed the avatar plugin. After reading how it is not to be used with buddypress, I went and removed all the components. I've also since upgraded to bp 1.1.2. I deleted the directory and installed new.
I see no cropping tool whatsoever in buddypress on the group page and have tried both IE and Firefox.
I don't think it is a permissions thing since the image gets uploaded fine and displays, it's just that it only displays the top corner.
I removed the edit to .htaccess, I don't have any cache plugins enabled. I removed the avatar.php and PNG files, I'm uploading an image that is 488 by 488 pixels as shown in the attachment.
Thanks for any help you can offer.