Get the ICO plugin: http://www.telegraphics.com.au/sw/dl.ph ... b4-win.zip
Goto C:/programs files/adobe/photoshop__/file formats/ and put the ico plugin in there.
1. Open photoshop and start a new document 70x70 with transparent content/background
2. Either make something from scratch or inject an image
3. If you inject an image, use the magic eraser tool to get rid of its background if you want to.
4. Save as "windows ICO" and select standard ICO format
hope this helps