You're right - you override theme functions by specifying the theme name in place of the word "theme", so theme_user_profile() would become garland_user_profile() (example).

Well spotted about the lack of user profile image. This is not an oversight on my part - this is just something I haven't done.

One think you COULD do is define a custom panel and set the body to a HTML output of the biography of your user + a floating image... I might have a go at doing that on codebase! Thanks for the idea ;-)