You create a .ico file, and then reference it in a .rc file. You then compile the .rc file into a .res file using the resource compiler (rc.exe). You then link that file in when you link. I beleive if the icon has a resource ID of 1, it becomes the default icon.
It's been a while since I've done this (Windows 3.1 and OS/2 development), so I might be wrong on some of the details...
Chip H.