I just thought I’d add to this for anyone else who might find it in the future. Windows has a requirement that any icon file must contain the icon at multiple resolutions, specifically 16x16, 32x32, 64x64, 128x128 and 256x256. If the icon doesn’t have all of these resolutions contained within it, it won’t work properly.
I discovered a website that is really fast and simple for creating icons for you (better than any software I downloaded) … http://icoconvert.com/
You simply upload your image, then at the bottom of the page you select the option for multiple resolutions and pick the ones I mentioned above before you hit download. I’ve tested this and it works fine on Windows 7.