I found the solution..
In inc/classes/BxDolJoinProcessor.php look for the following code & either remove or comment it out. Avatars will no longer be copied to the new members photo album.
if (BxDolRequest::serviceExists('photos', 'perform_photo_upload', 'Uploader')) {
$aFileInfo = array (
'medTitle' => _t('_bx_ava_avatar'),
'medDesc' => _t('_bx_ava_avatar'),
'medTags' => _t('_ProfilePhotos'),
'Categories' => array(_t('_ProfilePhotos')),
'album' => str_replace('{nickname}', getNickName($iId1), getParam('bx_photos_profile_album_name')),
);
BxDolService::call('photos', 'perform_photo_upload', array($GLOBALS['dir']['tmp'] . $aProfile1['ProfilePhoto'], $aFileInfo, false), 'Uploader');
}