First of all get RAD Video Tools from here.
Install the tools!
Well, imho its the easiest way to choose an animated gif as source format. The frame size should be 128x128 pixel.
For this example I am using this animated gif:
To convert this GIF into an animated avatar (BIK) open up RAD Video Tools, browse to the path where your gif is located, click it once(!) and press Bink It.
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