Hmm .. make sure when you make the head that its in pixels (128x128 pixels) not iches or centimeters.
You can try saving the head as a different type of file:For those of you having problems creating a head texture, here is a 100% free guide on how to create your head.
Create your head in your favourite art package. I recommend starting from the template texture (it is attached to this post).
Save your head as either a BMP, GIF, JPG, PNG, TGA or XPM. Go here: http://toribash.reversers.org/image2tga/
Upload the head. Once submitted, it will be converted to the correct format. Download the file once it is done.
If you cant get it to work, add me on msn and i will take a look at your head.