Use "folder.jpg" as folder icon?

[Jinx01]

Been sorting a lot of my game osts and other stuff, and adding folder.jpg images because it's nice to see what's inside. It's a bit annoying, though, that it still shows the image *inside a folder icon*. Is there any way to get rid of the folder icon and just show the image?

Note that I've tried creating .ico files out of the images, but it's a real annoyance. The images have to be square, and I've (ironically) made many of them vertical rectangles because the folder icon hides the left part of the image otherwise. Worse, Windows 7 links to the location of the icon in specific, not relative, terms. So if I move the folder, instead of locking onto whatever .ico is inside the folder like it does the folder.jpg, it can't find the .ico at all x_x

Is there any global tweak/fix for this? Or software to do it? I'm taking a lot of time to make these nice, and it's annoying to see my work half-spoiled because Windows is too dumb to use a .jpg as a file icon.

*EDIT*
What I want is something more like this:

 

[Snowknight26]

Right click on the folder, Properties. On the Customize tab you can select a file to use as the folder icon.

 

[Jinx01]

Right click on the folder, Properties. On the Customize tab you can select a file to use as the folder icon.

Hrm, doesn't seem to be working right now. And even when it did, it just gave me the same effect as in the image- it shows the pic as part of the manilla folder icon, like it's inside it. It doesn't actually use the image instead of the folder icon.

Why is so hard to explain to people?!

*edit* Check original post, added an image of what I'm going for.