So something that has me confused right now is avatars. How do they work? Is it a Deadra/Aedra taking form on Nirn? Or are they possessing normal mortals? Are avatars born like normal people but have something divine within them that makes them into a conduit for the Daedra/Aedra? I hope my rambling is making sense here...

It is just that when I was reading that post about Gelebor possibly being an avatar of Auriel I was thinking how that could be. Was he originally an elf and Auriel has now given him a part of her/him to make him an avatar? Or was always special, always connected to his god? Obviously this is not a discussion about whether or not Gelebor is an avatar of Auriel, I am just using this as an example.

The way the avatar are created isn't well explained. They seem very close to their god, but we don't know exactly how. Their soul may come from the God, they could be chosen during their life during their life by a god who transform them to be close to him...

There is a similar problem, with the distinction between Shezarine and Avatars of Lorkhan. Shezarrine seem to share one soul, even if they don't have exactly the same personality. One theory could be that Shezarrine are only avatars of Shezarr (both Akatosh and Lorkhan). However, I think they are not only avatars, but are...different.

So, as what we know about avatar is very Obscure, we cannot say anything about Gelebor thanks to it. In fact (it isn't only with gelebor, but also Dragon Cult, Falmerisation...), most of Skyrim lore is only scattered; superficial, and sometimes contradictory (with what come from Skyrim or other games) informations.
Most of the well worked and thorough lore comes from Morrowind/Redguard/Battlespire, sadly.