You cannot just rename a jpg file to ico because inside the file it still thinks it is a jpeg file.
You need to edit the image with an image editing tool and then use "save as" to save it as an ico format.
I have to say I have never done it but if you search in google for "windows icon editor" or "free icon editor" phrases like that you may find a free one.
I found this page of free icon editors
http://www.freedownloadscenter.com/Search/icon _editor.html
An image program I have called SnagIt allows you to do it and you may be able to download a trial version from here:
http://www.techsmith.com/screen-capture.asp
The full Photoshop product can do it but that is very expensive.
Photoshop Elements MAY be able to do it (I do not have it on this PC) and you can download a trial version from here
http://www.adobe.com/products/photoshopelwin/
This is a great image editing tool which is well worth having anyway and it is only about �60.