so what happens exactly when you click the icon?

It should:

1. launch xterm,
2. then it should say 'Desktop sms shortcut creator'
3. 'name:' than waits for your input
4. then say 'Enter phone number' then waits for your input
5. it will then close and you'll have a new shortcut in your app menu that you can also place on your desktop.

what happens too with your device?