Althought the FAQ claims, it is not possible, there is a way to use custom application icons in xfwm and e.g. the panel icon box wich Xfce. The respective hint ist to be found here. The lines relevant to the icon are:

xterm*iconPixmap:       /usr/share/pixmaps/gnome-gemvt.xbm
xterm*iconMask:         /usr/share/pixmaps/gnome-gemvt-mask.xbm
!XTerm*iconName: terminal
!Mwm*xterm*iconImage: /home/a/a1111aa/xterm.icon

In Debian Etch, I added the file /etc/X11/Xresources/zz_MyXresources with the line

XTerm*iconPixmap:       /usr/local/X11/bitmaps/sh_32x32.xbm

And created sh_32x32.xbm in /usr/local/X11/bitmaps/ to have everythint set up automatically everytime I log in. If you can't or don't want to fiddle arround with files system directories, putting the line into the file ~/.Xresources might do as well.