I downloaded and extracted the additional avatar jpgs that come with the GOG NWN.

Where do I need to put these jpgs so I can use them in the game? Thanks.

Those are personal avatars, like for here on GOG or on your favorite IM program. They aren't for the game.

To use an image as a character portrait in-game you'll need to convert it to a tga file then dump it into the NWN/portraits folder. There are several programs available to make this process quite simple, such as this one.

Where is the Portraits folder? I don't see it in the NWN folder anywhere.

The default NWN installation doesn't have a portraits folder, you just have to create a new folder in the NWN directory called "portraits".

Note: you do not have to download a third party program to conver a Jpg to a portrait. The game can do it for you with a single console command.

http://nwn.wikia.com/wiki/Portrait

So you would type

##ConvertPortrait MyPic

The ## at the begining of the line allows you to type console commands from the chat line.