The note says;
Note: The maximum size of your custom image is 400 by 400 pixels or 25.0 KB (whichever is smaller).
So an image at 300 square should work in my opinion.
I assume you edited the image with some editing software
independent of the forum interface. Correct? And then browsed to the file on your hard drive to upload.
Maybe you should double check the image characteristics to be sure. I suspect it's over both 400 by 400 and 25kb. One of those two parameters must be less than 400 by 400 and 25kb.
I'm going to edit a pic for mine to test.