What is the size of the image you try to upload?
In which album are you trying to upload?\
What is the size of combined images in the album you are trying to upload?


-- EDIT --
It seems the file manager is stuck to trying to upload still... If you clean your browsing data, do you have the issue still?

Well as of this post, the file manager is not erroring. I do not know when it stopped erroring, but I will note that it DID upload the "large" file to file manager and I just now added it to my album. I normally upload one signature and one avatar to their respective albums as I get them.

I did try to clean my browser data before, but that does not stop the error from happening. It is more of a time issue when it completes the upload to file manager?

Once I'm able to click the upload link in my albums and file manager opens, the image that was "too large" would be in the file manager.

So here's the time line
Day 0: I attempted to upload both avatar and signature files to file manager. Ava 11kb and Sig 172kb.
Result: I get an error that a file is too large and I cannot use the upload link for hours
Day 1: I attempt again to upload both avatar and signature, but I see that the avatar uploaded, so I upload the signature.
Result: I get an error that a file is too large (the message above) and I cannot use the file manager link for hours
Day 2: I attempt again to upload the sig, but I see that it uploaded, so I now drag them to be added to my albums.
Result: Successfully added.

I think the error is not with the AF site, but the embedded file manager. It is a bit of a nuisance to wait a day for it to allow me to access it to cancel or do anything to modify the error.

Update:
Day 2: I attempted to upload a new set again. This is just from clicking on the Upload Pictures link to open the file manager. I haven't even attempted to upload anything.
Result: It's now giving me the error: This picture exceeds your total album file-size quota by 175.9 KB.

My Attachment size is 5.05 MB now so I'm not sure what the problem is if I have 10 MB. Again, please let me know. If you can explain or if you need more information. Thank you!

you have 10 MB in total, not by album.

This means that your album quota is limited to 4mb as you are not on the contributor category.
The attachment quota is the total of all your attachment, via albums or via posts...

OK,

I ended up with this error message...

What I did was:
1- Create a new album
2- Upload in the download manager new pictures
3- Select these pictures to transfer to the Album Photo
4- I closed the album photo without saving (I forgot it)

When checking the album photo, no images are in, however, the first time checking after closing without saving the import of pics, one 'cover pic' was displayed...

Anyway... I tried to reupload the pictures, this is when I end up with the vBulletin message saying The current image exceeds the quota allowed by ...

I can just conclude that
1- the image uploader did not block me while trying to upload a too big image
2- even if this image is not stored in my profile album (and nowhere else I can find), the size of the images I attempted to upload is still recorded against my quota...