Here is how I change icons, works for me every time.
1) Open the new icon file in Preview
2) Press command-A to select the entire image
3) Press command-C to copy the selection
4) Control-Click on the file/folder you would like to change, select "Get Info".
5) Click the icon at top left (so there is a frame around it)
6) Press command-V to paste the image into that