The /avs folder almost certainly contains avatars uploaded by forum members.
In 2.0, this was a user-named folder, but in the examples provided, the name /avs was used, and many folks just used that name. (Look at recommendation #1 here:
https://www.simplemachines.org/community/index.php?topic=293441.0)
In short, folks have a user-named folder in 2.0 for custom avatars, often /avs. This corresponds to the /custom_avatar folder in 2.1.
Since that folder is identified in your configuration, under Attachments & Avatars, it must be present and writable or the upgrade cannot work.
I am not sure why it is not found, but I have a suggestion: I suggest utilizing repair_settings.php, and carefully scrutinizing the folder name vs the recommended name. Maybe there is a trailing space? If all else fails, use the repair_settings.php recommendation for that folder and I suspect things will start working.