It seems to be impossible to change a Retool user's profile photo. This isn't very important when logging in with Google, as it uses the Google account photo. On the other hand, users registering in the "classic" way cannot add a profile photo.
Hey Michael!
You are correct that it's currently not possible to change a non-Google profile photo. I wish I had better news for you here, but if you're not signing in with Google SSO (to use the image from Google), the only way to set that would be with On-Prem Retool with manual updates to the users table.
I added this thread to our internal request ticket and will keep you updated!
Totally needed. I can't even change my profile picture for retool itself. The (Group) Avatar makes quite less sense, if it only works with google SSO. 
Would be great to see this soon.
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Added your comment to the internal feature request—thank you!