I upload a .ico file and it saves but the picture doesn't show up when I go and check my blog. So, I just gave up and did it the way I always did: changing the code in my HTML.
Sucks, because it's much more work, but it gives me a result while Blogger's way doesn't. o.O Weird.
Bee tee dubbs, do you like it? :D It's a mustache!
PS: Bee tee dubbs is BTW :D
PPS: If it doesn't work for you either, here's a tutorial that works.