I want to create an icon for my folder named "TOOLS", as you can observe there is no suitable/satisfying icon available in Windows XP, so I want to create an icon and include it in icon list.
Is it possible with any such supporting softwares.??
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You don't need to modify shell32.dll just for that, storing a separate .ico file should suffice. Just modify the desktop.ini in your TOOLS folder. (see e.g. here)
You can edit your shell32.dll file. However, I don't recommend this.
The icons in shell32.dll can be changed using a Resource Editor (Resource Hacker, Exescope, etc.). As I said, I don't recommend editing it as it is a very sensitive system file. Here is a tutorial about how to do it with Resource Hacker. Take your own risk.
You can also use Microangelo Librarian (shareware) to change existing icons in shell32.dll. First make a copy of shell32.dll, and import it into Microangelo Librarian. Then edit any existing shell32 icons into whatever you want, save, exit, and replace the real shell32.dll with your modified copy.
First you need "Resource Hacker" to edit you Shell32.dll file icons. In order to save the changes you need to save the file as the same name but in a different directory. Then you need to run "Se7en File replacer.exe" Get you edited file from the directory you saved it into and then select Windows\System32 and it will copy it into that directory.