User images are now handled via File API. The MNet SSO code that synchronizes user images was just commented out and it does not work at the moment. For user experience it is important to transfer images again.
Note there will be backward compatibility issue as since Moodle 2.0, user images are always converted to PNGs. If such file will be sent to Moodle 1.9, it will be probably saved with JPG extension.