I agree. A frame or two is needed to round off the animation.
I know size is an issue here... just play with the optimize settings a little.
A trick I got from :se55 a while back was to give it a one piwel border for prefessionalism. A black one here I would think. It also helps in that it means less actual pixels being animated and allowing for smaller optimization.
Other than a few suggestions, I like it. Very cool effect.
I gotta say this is pretty cool, never saw an icon like this, an awesome effect of my name melting down into my icon, seems like it only needs one more frame to achieve a seamless effect, however... such as right before the avatar comes in most clearly