The general rule of nettiquite is that sigfiles should be around three or four lines of text. This is assuming 80 characters a line. You will note this rule makes no mention of garish image files. :-)

Of course, this rule is fairly flexible, especially when dealing with variable-width fonts like nearly all modern browsers. Small images are generally acceptable if the forum you're posting to allows them (They're still frowned upon in email or newsgroup posts, however).

So nowadays, that general rule is a bit more like if your sigfile is significantly longer (Either textwise or heightwise) than most of your posts or emails and is over 256 characters, it's too long. I know I, for one, don't like having to scroll through page after page of someone's sig just to focus on where the sig ends and the next post begins. Sigfiles are supposed to be things like signatures, not a museum of every quote you've ever heard or a 5MB array of image files. :-)