It sounds like you are trying to change a folders icon image, if so please use Apple's instructions in:
I just tried this and it works fine.
BTW have you update to Lion 10.7.2 for the most up-to-date version? If you have not then I'd recommend following the suggesting in this Update Process link.
Apparently the problem comes from there not being a thumbnail image available on the source file. When a thumbnail is not available, the OS (probably using Preview behind the scenes) creates one on the fly to use for the display of the file's icon. The result is that when you do a Get Info, you see the generic file-type icon rather than a thumbnail representation.
Couple of solutions.
• Use a program like GraphicCoverter to batch process all the applicable files, setting it to add thumbnail and preview images to the files. These then also become available for use in cataloging images.
• Simpler, but works only on one image at a time. Open the Get Info window for the source file. Double-click the larger image shown midway in that screen, the one under Preview. It will open in a separate window. Press Command-A (Select All in File menu), then Command-C (Copy in File menu). Close that new window, select the generic icon in the upper left of the Get Info window, press Command-V (Paste in File menu). Now you have an icon you can copy for use on another file.
Can you explain why there was no thumbnail for that file?
The OS does not create or add thumbnails, previews, nor custom icons to images or other files. Although it displays files with what appears to be a custom icon, it is not part of the file itself; it is created on the fly, just for display. Since it is not part of the file, it does not appear in the Get Info window.
Back in OS 9 days when you downloaded an image file from the web, either via drag and drop or via the download mechanism, the image file would typically be placed on the drive as a QuickTime image with both a custom icon and a preview image added to it.
I skipped earlier versions of OS X, and started with Snow Leopard, so don't know about earlier versions of OS X. Apparently the auto creation and addition of a custom icon and preview have been dropped in later versions in favor of using Preview to generate a temporary (for display only) custom icon on the fly. One result of this is that image file sizes are kept reasonably small - adding a suite of custom icons and a preview image to the file itself increases the file size a lot; it's not unusual for those additions to double the file size, or more.