Got it :D Took some digging and learned a few new variables along the way, but here's how to do it:
In phpinclude_start add (modify userid's as required):
$banned_avatarids = array(100, 200, 300);
In postbit_legacy (what I use anyway):
Find
<if condition="$show['avatar']">
<div class="smallfont">
<a href="member.php?$session[sessionurl]u=$post"><img src="$avatarurl" alt="<phrase 1="$post[username]">$vbphrase[xs_avatar]</phrase>" border="0" /></a>
</div>
</if>
Add before
<if condition="in_array($post[userid], $GLOBALS[banned_avatarids])">
<div class="smallfont">
Insert your text or designated avatar image here, for an image copy the href code above and modify the image source location accordingly
</div>
<else />
Add after
</if>
If you use postbit instead of postbit_legacy you'll have to compare and modify accordingly.
[U]Addendum
Next is modifying the MEMBERINFO template so their avatar doesn't show in their public profile either:
Find
<if condition="$show['avatar']">
<td><img src="$userinfo[avatarurl]" alt="<phrase 1="$userinfo[username]">$vbphrase[xs_avatar]</phrase>" border="0" style="border:1px solid $stylevar[tborder_bgcolor]; border-top:none" /></td>
<else />
<td> </td>
</if>
Add Before
<if condition="in_array($post[userid], $GLOBALS[banned_avatarids])">
<td>
Insert your text or designated avatar image here, for an image copy the img code above and modify the image source location accordingly
</td>
<else />
Add after
</if>