Hello Babidi Buu and welcome to A-U.
First of all... you're evil... you must immedediatly rush to the Club board and join the EVIL Nazgûl club. It's run by Witch-King, isn't
that awesome! Check out the first page for randomness and evil goodies and otherwise jump into the fun!
Now for your questions.
You are allowed two 'regular sized' banners (the size everyone uses) and one smaller one. The rules were made because some people have slower connections and it would take them ages to load just one page if everyone packed their signatures with graphics!
You can use any avatar - or banner - you want to, whether made by yourself, a member on the forum or someone outside the forum. Your banner and signature is your identity and your visual personality on A-U so you're free to personalise it as long as it adheres to the forum rules.
You can read the forum rules regarding signatures
here
I have watched the Movies(Atleast the Extended Edition) up to the point where i have most of the movies memorized and i have finished reading Sil and The Hobbit some months ago and i am currently reading The Fellowship of the Ring for the first time.
), favorite character from the books so far is Smaug. Yeah, im a villains fan 
] Davy Jones is also insanely epic. xD Basically I love everyone but Elizabeth and I could probably rant on about my deep hatred for her but I'll spare you all of that.
) same goes for Star Wars and Harry Potter. But out of all four, im more into Lord of the Rings. However, Davy Jones is my favorite character out of all the characters from all four of those movies combined(He's second in my favorite villains list though, behind Maleficent from Disney's Sleeping Beauty)
