Trying to create a correct icon for a live wallpaper now. To my great surprise, this is not really documented anywhere, thus I assumed the default 96 x 96 pixels icon will do just fine (after all, this is the size of the icon for the example live wallpaper project shipped with Android SDK. Everything seems to be just fine on the phone (including Gingerbread), although I noticed that other icons tends to be just rectangular "screenshots" instead of icons - again this is nowhere documented.Just did a quick test on the Xoom tablet, and to my another surprise, the icon looks completely ugly. Honeycomb seems to use 208 x 192 as the size of the icon (or rather thumbnail) which explains why the 96x96 icon looks so ugly (see the picture) :
Hope we'll get the updated documentation soon and this guess work will be a thing of the past.
Any comments on this topic are very welcome.