I wanted to post this here in case anyone else is having the same error....

I am running vbulletin 4.x and I received the error: open_base dir restriction in effect. etc etc
Also the error: filename cannot be empty in path/includes/class_image.php on line 333

I tried to edit the actual files, didn't work. Then I found a post on a google search http://www.vbulletin.com/forum/archi.../t-283290.html and I followed the directions.

I went to Options>>Server Settings and Optimization Options>> and for 'Safe Mode Upload Enabled' option I selected 'yes'. I created a temp directory within my forum directory (not sure if that is secure or not) and I set permissions on it to 777. I then went to the option 'Safe Mode Temporary Directory' and I set the full path to my new tmp file there. I should look something like: /home/sitedirectory/public_html/forum/temp

Now when I try to set a custom avatar, I receive no problems or errors.