Well, yes, there currently is no way to let people use images as their avatar that do not meet the restrictions. I'm not saying it's impossible to do this - but, it will require quite a bit of work on my part.
I wanted to see some examples, because if the difference in size wasn't too great, I would just up the restriction. However, I don't want people using avatars that are the size that you linked to.
The eventual solution would only stretch the image to fit the proper size, it would not allow you to crop. Sooo, you would end up with slightly distorted pictures for your avatar. I've made some examples: