Changing Folder's Icon

I am using Mac OS X Snow Leopard 10.6.8. I tried changing a folder's icon using this well known method. I used a png image as my target icon. The icon does get changed, but not to the picture itself, but the icon of a png file. The Icon I want to be there: What I get: You see? That is not the png itself, but the icon of a png file. I want the png to be the icon. Am I missing something? (If it is important, "Show Icon Preview" is turned on in Finder view options. This folder was read-only for everyone but after seeing https://apple.stackexchange.com/questions/9623/problems-changing-drive-icon I changed it to Read Write for everyone)