Grainy application icon under Windows/VS2005

[ronM71]

My *.ico file looks great on file explorer, 16x16, 32x32 smooth and nice. when building a Qt win32 application and including it as IDI_ICON1 in the resource file, and resulting application icon will look grainy in 32x23, low resolution when *.exe file dragged in file explorer, not at ALL like it looked before.

Has the resource compiler butchered my icon somehow? how do I get around it?