Emoticonize.com users say:
Awesome to the max!
emoticonize.com is a simple tool for converting all kinds of images into proper emoticons for MSN Messenger and Windows Live Messenger.
First download your emoticon (right-click and select Save Image As...).
Then press the menu icon ( or ) in Messenger's top right corner, and go to Tools > Emoticons > Create.
For some reason, Messenger doesn't show big emoticons unless they are animated .gif files. This tool will automatically convert your pictures to the right format.
If your picture is smaller than 19 x 19 pixels, Messenger will stretch it. This tool checks the size of your picture and always makes it the correct size.