So does this mean that NewIcons and normal Icons can live together in complete harmony?
Yes, they do. If you look at the icon information from your basic non-newicon 3.1 installation, you will see that there are some strange-looking tooltypes, starting with a line reading "do not change the following lines" followed by several rows of "IM1=blablabla" and "IM2=blablabla". These IM1 and IM2 tooltypes hold the newicon image information.
The newicons program just patches icon.library, so that it reads these tooltypes and uses them instead of the original image.
A similar method is used by OS 3.5 and 3.9. Here an additional chunk of information is added to the end of the file, letting the old-style icon intact.
However, this method has one major drawback: if you snapshot an OS 3.9 icon from a 3.1 system, the additional info is cut off because it is unknown to the older library.
The tooltypes approach is better because the information stored in the tooltypes is not touched by the older icon.library. Tooltypes were always a part of the file format.
Bye,
Thomas