The Peter K. icon.library will display all icon formats correctly (with a suitable pallette, obviously). You don't need to convert them to a lesser format unless, for example, you want to reduce the file size of the .info file so they open more quickly.
Ah, then I am possibly misunderstanding what the icon.library does. I was assuming it would change the icon set to something better than the default WB 3.1 icon set. If I want better looking icons for 3.1, where do I look?