It's not a bug, it's a feature, no seriously
IIRC: (Wasabi & co will correct me if I'm wrong)
VB3 comes with a feature to allow the forum host to host avatars for it users.
Rather than use this feature, and needlessly waste bandwidth VB was modified by the GAF team to allow externally hosted avatars instead, however this feature is not compatible with the "turn off avatars" feature you see in your control panel, that only controls avatars hosted by GAF, and as GAF isn't hosting avatars that feature is moot & disabled.