Changing icon of app using CandyBar failing on OS X 10.4.11 Tiger
Version 2.6.1 unfortunately didn't have Pixadex built in, and those image wells only supported the actual Icon of whatever it is that gets dropped in them. For example, the .png files you dropped in currently have the icon of:



and that's exactly what it's giving you. So essentially what gets dropped in those image wells needs to be represented (having the icon) with what you drop in there. If you try dragging anything that already has a custom icon associated with it into the image well you'll quickly understand how it works.

I found the best way to manage icons before CandyBar 3 was to use Pixadex in addition to CandyBar 2, since it allows drag and drop between the two apps. It's precisely why they eventually merged the two, because they really did belong together. 

• Pixadex 2.0.2 download (works with 10.2+) and other older icon related things.