Yup, got it now. LOL. The spelling and grammar was a little rough in the other post, I was getting confused.
Something is definitely wrong as I have this working on a 3.5 development no problem. The html cat pages should not be outputting icon.php but creating the actual http location of the images stored on your server.
These are just a couple of shot-in-the-dark ideas to check.
html_catalog.php, check the script array against the latest distribution (note i have included my code from an older version it could be different in the latest distro)
Code:
$php_scripts = array("search.php","giftcert.php","help.php", "cart.php", "product.php","register.php", "home.php", "pages.php", "pconf.php", "giftregs.php");
Check that your images location is set correctly in the database. Image-path in xcart-icons table. I have had a lot of troubles setting this properly.
Nice 404 page btw.
Good luck.