Well, I think that's what I did, except I used Preview as my image editor to make it smaller. You're saying that doesn't *really* make it smaller? I have to display it smaller, and then do a screen shot of that smaller icon to make a REAL small image? Weird. But yes, Preview puts white space around the image, and I need that background transparent instead. I'll fix with Gimp.
Addendum. Turns out, for folder icons, you can download ones with different colors and sizes and transparent backgrounds as png files. Nice. But when you download a 32x32 one, and then a 64x64 one, each one of them makes exactly the same standard size icon on the desktop when you upload them through "Get Info".