Not that it is a great one, but that is how I made the one for my link list.
http://www.cleos-porn-links.com/
I also put this in my header
<link rel="icon" href="favicon.ico" type="image/x-icon" />
<link rel="shortcut icon" href="favicon.ico" type="image/x-icon" />
It seems to make it show up in more browsers. The one from this board doesn't show up in Mozilla, but my LL one does.
I measured what size it shows up in my browser and it is 16x16 so I would say that no matter what size you make the image it will display at 16x16 unless Windows does it different.