SSIcon is a MDL Programmer's icon editor. It has great tools for creating icons in monochrome, fixed color, balanced color*, and design file color* formats. Also great tools for stealing icons, such as a screen capture tool and a point-and-click match tool. Writes icons as code or as binary resources. With the match tool, you can modify or replace the MicroStation built in icons very easily, no idiot checking performed (so be careful, changes you make will be permanent until you reload MicroStation!).
Download the latest version here.
Price: Free!!!
*As of this writing, MicroStation does not support balanced-color or design-file-color icons. It might in the future, so SSIcon supports them. If the icons in these formats do not display, it is not a bug.