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Originally Posted by Greg Marra
Photoshop does NOT save in the .ico format. I'm not sure what saves in the mouse cursor format.
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IIRC, the Windows mouse cursor format is just the icon format, but don't quote me on that; I haven't touched those parts of Windows in years, so my knowledge there may be quite rusty.
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Originally Posted by Greg Marra
However, newer versions of windows let you set images (especially PNGs for their alpha layers) as icons, making them a decent standby until you can put them all together in a .ico file (Which can hold many icons).
I don't know of a program that makes them for free though.
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It's funny that you should mention Windows icons and PNGs in the same post.
http://www.winterdrache.de/freeware/png2ico/ does a pretty decent job of creating Windows icons from PNGs.