You can set a logo (pre made ones only), enter a name and description, choose between racing (50, 100, 150CC or Mirror) or the two battle modes and which items are available when racing (All, Shells, Bananas, Mushrooms, Bob-Ombs, None). No individual toggling for each item.
The communities are really more like rooms.
You join a community pre race lobby and can send out pre fabricated messages like the types of "OK!" or "LET'S RACE!". Noone is in charge of the community/room it seems, and I'm guessing the first one to join an empty one is made the operator (handing it down to the next one when he/she leaves).
Avatars are the peoples Miis, but you can race with the Mario gang. When you find people online it looks pretty much like on the Wii, with the globe and everything.
Also, I'd like to retract my previous Red Shell message. They do indeed follow the track around like in MKDD etc. when you fire it blindly.