I'd pay $5 a pop for a custom favicon - I give you an image, you pixelart it. Not the crappy png-to-ico converters, but an actual person that knows what they are doing. Maybe even $9 if you let me pick from 3 options.

My current approach is to scale down a png in Pixelmator and hope there aren't that many jaggies. In the end, they usually look like crap and not as sharp as the ones in this post. I would follow this tutorial, but there is a Miracle Function that involves knowing how to do shadows based on a light source - which I don't know how to do.