Where can I create a forum that allows members to upload a picture
direct from their computer's hard disk. The forum ought to have
emoticoms also?

The solution to your problem is to use a piece of software called
phpBB.  This provides you with a bulletin board or forum system to
produce the community of your choice and is one of the most popular
systems at use on the web for this kind of thing.  Because of its
popularity it is regularly updated with security fixes and new
modifications.  Best of all the software is free!  There are NO fees,
NO subscriptions and NO restrictions on the software!

To use phpBB you need to have a server that can use php as a scripting
language (this originally used to exclude many Microsoft-based servers
but this is not the case any longer).  If your server does not allow
PHP scripts please ask for a clarification and I will provide you with
a forum that will work on your server (let me know what programming
language you require).

I have personally used this system on a number of different web sites
to set up forums and I find it very flexible and easy to use.  It has
many great features including emoticons, multiple forums/categories,
HTML or text posting options, email notification, member features and
easy to use administraction facilities.  It also has good security
options which are essential.

The full feature list can be found here:
http://www.phpbb.com/features.php

You can find out more about this system as a whole here:
http://www.phpbb.com

It can be downloaded here:
http://www.phpbb.com/downloads.php

The phpBB FAQ are here:
http://www.phpbb.com/support/documents.php?mode=faq

You will also need to download the standard "Attachment Modification"
(and probably the "Shrink Attached Image Mod" so that your webspace is
not eaten up by images that are too large!).  These modifications
allow the users of the forum to upload files.  These modifications can
be downloaded from here:
http://www.phpbb.com/phpBB/catdb.php?cat=51

I hope this answers your questions and queries, if you have any other
questions on forum/bulletin board software please let me know.