As far as I can tell, there have been (at least?) three types of icon embedding. There\'s the original style used by shell32.dll and friends, .NET\'s embedding, and the new
I'd highly recommend taking a look at this solution posted here (http://einaregilsson.com/add-multiple-icons-to-a-dotnet-application/). It integrates right into a ms build post build event and doesn't require an unmanaged project (to create an assembly from a .rc/.res file).
This removes a dependency on managing a second solution / assembly anytime you want update an icon and saves you from IL Merging the compiled c++ assembly.
I'd also recommend taking a look at WIX for your deployment. I've written a guide that accompanies this answer located here.
I never heard the term "icon embedding" before. If you are talking about the icon that's visible for a EXE or DLL in Explorer or a desktop shortcut: that's done the same way for any Windows program. Both WF and WPF give the assembly an unmanaged resource with the selected icon using the /win32res compile option. You can see it in Visual Studio with File + Open + File, select the EXE or DLL.
To create a .res file, first create a .rc file. You can create one with the C++ IDE. Right-click the solution, Add New Project, Visual C++, Win32, Win32 Console Application. Right-click the Resource Files folder, Add + Resource, select Icon, Import. select your file. Repeat as needed. After you build, you'll get a .res file in the project's Debug build directory.
Back to your C# project, Project + Properties, Application tab. Select the Resource File option and navigate to the .res file.