This works out of the box on WP 3.5 and the Twenty Twelve theme. Love it so far. It kills the calls to gravatar.com and serves local avatars.
But what I don´t get is why this is supposed to be working alongside ´Simple Local Avatars (only)?
So what exactly happens IF the user has a Gravatar will that be served instead because I don´t want that at all. I don´t care if users have Gravatars, I am taking care of my users privacy.
One last thing: Does it support Buddypress´s uploaded Avatars? Please keep up to this, many people ask for this kind of stuff. Just call it "DISABLE GRAVATAR" and you´ll have a million downloads a day^^
And please add a donation page!