I had this problem just this week. When I selected an ico to replace with, I got nothing. But if you read the screen more carefully, it says something like "select a file that has an Icon". So I selected my old VB app, with the good icon in it, and it replaced the Blitz rocketship icon. This works every time, while selecting the .ico itself never worked. Its like ResHack only wants to hack-in an icon that it hacked-out of something else.
There may be other ways, but this is how I did it.
There may be other ways, but this is how I did it.