A new alpha release is out, download here: http://drupal.org/node/295520
The previous alpha release had some weird bugs I wasn't able to squash. I wasn't happy with how the module handled the icon set and icons data, and with the deadline fast approaching, I decided to rewrite those functions. At the same time, I made some improvements to other parts of the code, splitting some functions into smaller ones, generally adding more structure to the module. It now works very well, and I'm more comfortable with how it works under the hood.
The admin form has also been given a face lift, and looks now more like the Blocks form. Note that icon sets are not meant to be moved across the different sections. While it doesn't break if you do, I'm looking into fixing this.

The admin form's theme function has also been replaced by an icon-iconsets-form.tpl.php file.
There are now 3 things on my TODO list for the icon.module:
There are also some non-coding issues that are bugging me:
message-error icon and it's only available in 16x16 and 32x32.Hopefully, some good icon set guidelines and eager icon designers will give us some great icon sets suitable for a web CMS.
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