Hi,
I recommend using the free
Adium instead of MSN Messenger. I have an installing
tutorial over at Mac Kindergarten.
To set the Picture, go to Adium's preferences > Personal > Choose Icon > Choose
In the file open dialog you'll see the Finder Sidebar and below the regular folders (home, documents) the media browser, including your pics from iPhoto.
Hope this is clear to you, tell me if not.
/Rupert