I still need to work out how to smooth the outlines a little more when doing this, but try this for now:
And you should never make something slightly bigger, it'll look horribly pixellated due to the scaling.
Edit: Oops, double post, was going to copy and paste into my other one, but forgot and hit Submit instead. Oh well, probably best to leave it this way now.
Edit 2: Figured out a better method for GIMP:
Edit 3: My new GIMP method for those interested is as follows:
Cropping the head:
1: Get your selection of the head (I usually use Scissors Select Tool, but the lasso and colour selection ones are better sometimes)
2: Select...Invert
3: Layer...Transparency...Add Alpha Channel
4: Delete
5: Scale image so it'll fit for the avatar (leaving room for outline)
Adding the outline:
1: Image...Canvas Size to increase canvas size, centering original content (usually the outline will grow out of the border otherwise
2: Fuzzy Select with 255 threshold and don't select transparency to reselect the head (or it might still be selected and thsi step can be skipped)
3: Layer...New Layer (Transparent and image sized)
4: Go to the layer dialog and drag the new layer underneath the original one
5: Select the paintbrush tool and set the brush type to Fuzzy Circle 11 (or experiment)
6: Set foreground colour as desired
7: Select...Selection Editor
8: Use the last icon in the new window to paint with Paintbrush Tool without brush dynamics (once you have done this once, you can just shift-click the icon in future).
9: Image...Canvas Size to decrease the size back to avatar dimensions
The fuzzy circle gives the smoothing effect rather than the hard pixels on the outline, giving it a much less jagged glow than the other GIMP methods we've come up with so far.