rocknbil - 7:32 pm on Oct 22, 2007 (gmt 0)

A proper .ico file is actually a two-layer file consisting of a 32x32 pixel indexed color image and a 16x16 pixel indexed color image. They can be transparent or not. Depending on where it's deployed, the appropriate one will display (32 for desktop, 16 for in-folder, 16 for address bar, 32 for bookmarks, I think.)

png2ico is a command line app for this, it's free and easy. You create the two images, save them as .png, then run the program via command line/DOS: png2ico favicon.ico file1.png file32.png [press enter]. It's a snap, make sure to make a donation when you download it, this is one of the gold nuggets of the Internet. :-)