To fix this, edit the following in the /js/co-authors-plus.js file:
At the time of my original post, all admin users were displaying the default gravatar when viewing the post edit screen.
However, I just rolled back and tested again in Chrome and Firefox and, you are correct, they do seem to be displaying. Perhaps a glitch in their system or cache issue at the time? Trust me, I tested and tested and tested and they wouldn’t display.
So, either way appears to work (but .jpg is optional anyway according to the original author).
Thanks for posting back on this and my apologies. Whatever the issue was, it’s not an issue anymore.