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anyone know who was first to use avatar in fiction to describe the virtual persona representation of a real person either in cyberspace or as telepresence?

It is not in True Names, which would have been my first guess. I have vague memories of it being used in new wave science fiction in the early/mid seventies.

Quick google suggests Poul Anderson used it first. Figures.
(From "Call me Joe" - really?).

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I seem to associate that term with Arthur C. Clarke, for some reason. Can't cite a specific example though; and it may be that he used it in a meaning closer to its original (an incarnation of a god, the term being most often associated with the Hindu god Vishnu)...

Robert Heinlein: Waldo & Magic, Inc., 1942, is a precursor. Waldo Jones, a brilliant, eccentric, wealthy, inventor who lives in a private space station in low earth orbit.

Afflicted with myasthenia gravis from earliest childhood, Waldo lacks the muscular strength to walk or lift things with his arms. By living in the weightlessness of space he is able to move freely. His primary invention is a system of remote-controlled mechanical hands which the world has nicknamed "waldoes."

This story has been largely forgotten (even though it still makes great reading). The notion of a waldo, however, has not. The word itself has come into common usage; the American Heritage Dictionary describes it as follows: "A mechanical agent, such as a gripper arm, controlled by a human limb." Real-life waldoes were developed for the nuclear industry during WWII; they were named after the invention described by Heinlein.

This technology is known today by the more generic term "telefactoring"; it is used in a variety of industries.

See:
http://www.technovelgy.com/ct/content.asp?Bnum=23

The path from that to avatars is complicated. The relationship between real computer technology and the science fictional extrapolations is reviewed in my cover article of IEEE Computer, January 2000.