is there any way to enable this (showing it)? Last time using Kubuntu 8.10, I can hover my cursor to a buddy icon, then his/her avatar will be shown but now I cannot.

Using Debian squeeze/sid + experimental KDE 4.2

Settings -> Configure... -> Contact List -> Use Contact photos when available.
If you want to show photos in the tooltips, press "Change Tooltip Contents..." and add "Photo" to the right list.

Thanks, but even after that I still couldn't get that to work. Here's my config screenshots

Ah, sorry. It seems I was wrong about "Photo" - it shows the path to the picture, not the actual picture.

I haven't used Kopete in KDE4 so I'm not sure how to fix it. Check your Account setting (Settings -> Configure... -> Accounts -> Modify Account...) and see if you find something that has to do with avatars. I use MSN (with Kopete in KDE3) and have a setting that says "Download the msn picture: [Only Manually / When a chat is open / Automatically]".

There's only option on setting our default avatar, regarding this problem.