The answer to this question really depends on what OS your icon is intended for.
If you’re creating icons for older versions of Windows, we’ve found through experience that its best to start with the 32×32 sized, 256 color icon when you make an individual icon. Its always easier to start with a lower “base” model and add onto it than to start with the best possible looking icon and “dumb it down”.
What does this mean? Start your creation process by getting the 256 version to look right and THEN add the flashy gradients and smooth edges of 32-bit icons.
If your icon is intended to only be seen on Windows XP, then you can probably forego all of the above and design and create your icon specifically with the kinds of effects that XP offers.
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