To set a pic to your buddy icon, do as follows:

1) Right-click on the icon of your choice, and select "Save Picture As..." (This might look different on different browsers, but it'll be something like that).
2) Leaving the filename and file type alone, pick an easy-to-remember folder to save the picture in.
3) Now, open up AIM, if it's not already. On the Buddy List itself, click the "My AIM" menu (leftmost), then "Edit Options" and then "Edit Preferences."
4) Select the "Buddy Icon" tab from the preferences menu, and click "Browse PC."
5) Browse back to the folder where you saved the pic in step (2), and either double-click the file, or single click the file and then click "Select."
And that should do it! Theoretically you should be able to use pretty much any picture (.BMP, .GIF, .JPG)