Ok....dont use the gradient from the text layer. You dont need it...whats cool about this psd file (which I'd never seen before) was the grouped layers. Right click on the 128 folder (or whatever res you want) then hit "Duplicate Layer Set". Set the destination to be a New document name Mozilla for simplicity. Now you're sittin with a grouped set of layers in a new document. (I just saved this file as a png and did the rest of my tweaking with fireworks, but you probably dont have that option) Zoom in really far to help you move the layer group to the point where the top edge is right at the top and the left edge is 1 pixel from the side. Then go into the "Image" menu and hit "Canvas Size..." set this to 128 by 128 pixels (or whatever res your using) and
make sure that the little orientation box is set to upper left. Now, go "File", "Save As..." and png from the drop down menu. Name it what you want, then hit Save.
Now, open IconDeveloper, then hit "File", "New", "Icon from Image...". Navigate to your png in the box and click on it. Now you should be presented with the Icon making screen, where you can choose what type of icon you want it to be. Make your ion (it should be the one that you've been supplying the numbers for the resolution) and hit Ok. Now go "File", "Save As..." and name it what you'd like, then hit Save.
Ok, I'm done....wow. That should work, since I just walked through every step on my computer and now have an incredible lookin mozilla icon if yours doesnt work out.
Good luck!