Arty and Shelley, thanks to both of you for giving my some input on this one. Since this site has not been launched yet I can't post this URL in public yet. PM is OK.
Arty, most likely I have messed something up. I looked up the size of forum-read.png which was 100px X 100 px, I think. I created a new PNG in Photoshop with the exact size and pasted my newly created icon in it. I uploaded it to the same directory as the original file and just switched names of the two files.
Shelley, I know XenForo uses coordinates for showing icons etc. In this case, since it's only one image object, I thought I was safe just using the same image size as well as save it in the same format.
I just verified that my new icon is showing up when I enter full URL: styles/default/xenforo/widgets/forum-read.png
But it does not show up in the forum.