In order to get custom icons for your URL links on your Windows 7 desktop, the icon file MUST be copied to the Windows\System32 folder.

The lnk file must be created in a folder other than the Users\Public\Desktop folder first.  Edit the properties and set the icon to point to the one you put in the System32 folder.  

Once have created the lnk file, copy it to the Users\Public\Desktop folder.

Voila.  You now have a URL link with a custom icon on all desktops in Windows 7.