New updates got pushed overnight and I just spotted the new settings screen :

To set your picture just go to your profile screen and click settings on the far right, then paste in an image url.
For the time being you get my disturbing beard goatse I made for my intro post ;)
The profile picture info gets saved the JSON metadata associated with your account , for example my current metadata contains :
{"profile_image":"https://www.steemimg.com/images/2016/08/31/steemhole560a8.png"}
Here is the full changelist for release 0.1.161109 #612
pushed by @roadscape about 3 hours ago - For more information see github

I see a lot of other needed bug fixes and tweaks all over the place , but I'm mostly just stoked to finally have a profile picture :)
Edit : Just spotted @pfunk has a great post about this with instructions for setting your profile via the cli wallet
Everyone please also read and upvote @timcliff's great call to action about week ago - "Attention: Calling All Developers - Let's Polish The Steemit.com Mothership!"
Thanks to everyone working hard towards a better steemit for all of us !