All of the icons are in the .icl file. It doesn't really matter where you put it. I put it in the windows folder myself.
Someone's bound to ask, so here are some instructions for making windows use an icon for a file type:
1. Start Windows Explorer or My Computer, and go to Tools -> Folder Options -> File Types.
2. If the file type (nds in this case) doesn't already exist, click New and create it.
3. Select the file type from the list, and click Advanced.
4. Click the Change Icon button, click Browse, locate the file with the icon you want to use, select it, and click Open. If you don't see the icon file, make sure to set "Files of type:" to All Files.
5. Select the icon you want to use, and click OK.
6. If you want, type a description of the file type in the text box next to the "Change Icon" button.
7. Click OK. You sometimes have to reboot before the change takes full effect, depending on how stupid Windows is feeling at that particular moment.
Edit: Those steps are for Windows XP. On older versions of Windows the process is very similar, but not exactly the same; some options are in different places, for example. I have no idea how to do this on Vista, or even if the icons will work on that OS.