Basically, I THINK it is:
1..... Find a picture you want to represent your folder
2..... resize it to 32 x32 Pixels
3..... Save it with a name you will know (in a location you can find)
4..... Open "PROPERTIES" on the folder you want to change
5..... Select "CHANGE ICON"
6..... Go find your new picture
7..... Select it
8..... Hit "APPLY"....... then, "OK"
I may be a little off on the exact steps, but this should get anyone close enough that they can achieve this.
BTW, I have done this, and the selected photo doesn't always come up every time. I guess the computer forgets every now and then.