I have making icons for Windows, it’s always awkward and full of restrictions, but that being said, I just found a freeware application that creates Windows icons (including Vista icons), and is very nice to use.
It’s called IcoFX. I used to use Microangelo and, honestly, I find IcoFX easier to use and more powerful as it does a superb job of creating 16 color icons from 24-bit originals.
In Microangelo I always spent a bit dabbing around the 16 color versions to make them slightly more readable, but in IcoFX I hardly had to touch anything up.
Well worth a try, if you have to make an icon for Windows.