Make sure that the image hosting site works (Igmur is a good example), and that you copy the address of the image within the website, to the .json file for the custom character.
Here's a good guide that I found on GameBanana:
https://docs.google.com/document/d/1sp1gaAgysC3LWSKUNcY8PWmmfbjJlUKgbxpi1Q4c5b0/...
(it's a Google Docs guide)