hehe
yes, using photoshop (rather proficiently). In addition to the .png, I tried a .jpg, 16kb, and the size is at 125x94 pixels. The instructions state that the file needs to be the following: "The maximum size of your custom image is 640 by 480 pixels or 64.0 KB (whichever is smaller)". My image is both under 640x480 and below 64kb.
It seems that it's some other issue, but it's not worth the digging to figure out what the issue is. Thank you for your reply.