1. A wonderful web site for converting icon from "png" file. http://converticon.com/

2. Add 32 bit icon to VS2005 resource list

The icon editor in Visual Studio is really bad.
If photoshop doesn't support exporting to .ico, try to search a plugin to allow it or search for some freeware/shareware icon editor that support true-color icons.
Now, if you want 32 bit icons (that's true-color + an alpha channel) for XP, you need to use a trick because the Visual Studio icon editor will corrupt the alpha channel.
The VS icon editor just doesn't support alpha channels and when you import an icon containing an alpha channel, the alpha channel is simply removed by Visual Studio. When you then save your project, the icon on your hard disk will have lost the alpha channel to. This is really a shame for an otherwise very good IDE.
Anyway, what I do is the following:
Copy my alphablended icon into my /res/ folder
Import the icon in visual studio
close the icon in the resource editor of visual studio
save my project
RECOPY the original alpha blended icon back into my /res/ folder, because Visual Studio has just foobarred my nice icon.
Make sure you NEVER open the icon again in Visual Studio or it's foobarred again