A while back, this blog was updated to the new Blogger and I was the custom icon that was displayed with my blog. And of course, I forgot where I had hosted the icon. I came across an blog posting for MyFavatar, a free site for hosting favicons for blogs. I decided to give it a shot and it's one of those things that just plain works.
They made it pretty simple. You register for an account, upload an image, and they create the .ico file from the image. They even provide the html to enable favicons in your blog.