1) I changed the photo in OWA, I clicked my username in the top right and clicked "Change Photo" and proceeded from there.
2) I'm what you would call a "regular user" I have no admin rights as far as I know. I am not the only person who encountered this. However, I helped her with her photo by changing the dimension (which hers is 150x150 and 10KB) and I can see her photo in both the 2010 client and OWA but she cannot see my photo in either OWA or the client.
3) On my client I did add myself as a contact and added a photo to it. I can see the photo on my client, but my other employers still cannot.