When I was looking for ways to create character graphics for inserting into Inspiration, Kidspiration or Smart Ideas, I was very aware of finding something to use that was 'free'. I used WeeWorld to create character Weemees, and took screen captures of them to place into the diagram I was creating.
I came across Mini-mizer from 'Reasonably Clever' which creates Lego style characters, but there was adult content, so I put a tweet out on Twitter and received a link to the 'Kid Friendly version of Mini-Mizer'. It has a lot less graphics but you can still create great characters or Avatars.
Again you will still need to take screen captures to copy these images.
R rating: R13