It should be as simple as this:

Icon=foo in /usr/share/applications/hildon/foo.desktop

a 26x26 in 26X26/hildon/foo.png
a 40x40 in 40x40/hildon/foo.png
a 64x64 in scalable/hildon/foo.png

no cheating, exact image sizes

exit all programs
gtk-update-icon-cache -f /usr/share/icons/hicolor
reboot

Works for me every time.

That's exactly what I did, and it does not work. Both locations use the icons in this order:

scalable
64x64
40x40
26x26

So, I have 2 bigs icons, or 2 small ones... Don't understand why. My code is here:

http://trac.gbiloba.org/papywizard/browser/trunk/maemo

I couldn't seem to svn your project, but if your latest 2.1 deb is close enough, then your icons look fine.

But I'm just a simple caveman and your desktop ways scare me. If your project was mine, here is how my tablet desktop file would look:

[Desktop Entry]
Encoding=UTF-8
Name=Papywizard
Icon=papywizard
Comment=We put the Pap back in Wizard
Exec=/usr/bin/papywizard.sh
Terminal=false
Type=Application
Categories=Application;Internet;
X-Osso-Type=application/x-executable

Maybe just give this a try with my other steps above. And just to be safe, after updating the icon cache, go straight to reboot; don't go lookin' at icons.

Also, not that it matters, but it couldn't hurt to have a '!' after the '#' at the top of papywizard.sh.

I will try your desktop file...