Good question.
Also had problems with editing my signature. Says too large or exceeded some format size. And vague on what to do.
[TABLE="class: tborder, width: 90%, align: center"]
<tbody>[TR]
[TD="class: alt1, bgcolor: #EEEEEE"]Signature Image Maximum Width (pixels)[/TD]
[TD="class: alt1, bgcolor: #EEEEEE"][TABLE="width: 100%"]
<tbody>[TR]
[TD]<input type="text" class="bginput" name="usergroup[sigpicmaxwidth]" id="it_usergroup[sigpicmaxwidth]_88" value="500" size="20" dir="ltr" tabindex="1" style="font-size: 11px; color: rgb(0, 31, 48); border: 1px solid rgb(144, 175, 192); padding: 4px;">
[/TD]
[TD="align: right"]

[/TD]
[/TR]
</tbody>[/TABLE]
[/TD]
[/TR]
[TR]
[TD="class: alt2, bgcolor: #F6F6F6"]Signature Image Maximum Height (pixels)[/TD]
[TD="class: alt2, bgcolor: #F6F6F6"][TABLE="width: 100%"]
<tbody>[TR]
[TD]<input type="text" class="bginput" name="usergroup[sigpicmaxheight]" id="it_usergroup[sigpicmaxheight]_89" value="100" size="20" dir="ltr" tabindex="1" style="font-size: 11px; color: rgb(0, 31, 48); border: 1px solid rgb(144, 175, 192); padding: 4px;">
[/TD]
[TD="align: right"]

[/TD]
[/TR]
</tbody>[/TABLE]
[/TD]
[/TR]
[TR]
[TD="class: alt1, bgcolor: #EEEEEE"]Signature Image Maximum File-size (bytes)[/TD]
[TD="class: alt1, bgcolor: #EEEEEE"][TABLE="width: 100%"]
<tbody>[TR]
[TD]<input type="text" class="bginput" name="usergroup[sigpicmaxsize]" id="it_usergroup[sigpicmaxsize]_90" value="20000" size="20" dir="ltr" tabindex="1" style="font-size: 11px; color: rgb(0, 31, 48); border: 1px solid rgb(144, 175, 192); padding: 4px;">
[/TD]
[/TR]
</tbody>[/TABLE]
[/TD]
[/TR]
</tbody>[/TABLE]
Stick to gifs and jpegs and you won't go wrong.