hey no need of all that programs!!
just go to paint. switch the GRID on (i think only availabale for the XP Paint...hmm...)
then color ur icon! (better zoom to abt 400 - 800%)
then click FILE-> SAVE AS
after that...
in the SAVE AS combo box: click ALL FILES...
then type the FILE NAME as: youricon.ICO (<-be sure to add the extension!! or it will be just a file

)
thats it! now its an icon!!
NOTE: the picture should be less than 128 by 128 pixels... (XP maximum is 72, MAC max. is 128)
but i think ALPHA BLENDED things r not possible. try photoshop...
if you want TRANSPARENCY for the icon then CHOOSE ur transparent color and then PAINT THE CORNER pixels(of the square image) in that colour...
if u want any more help
reply!!