Invalid icon file located in 'application folder'

I was having the same issue, I had the icon in my application folder, I saw it in the explorer, everything looked fine, but I was having problems with TFS, going back and forward then the problem appeared, what I did was the following:

1. Went to my Setup project properties and on the AddRemoveProgramsIcon property clicked on Browse, then saw that the file name was there but not the physical icon as in the image below

2. Click on browse and searh in the Application Folder for my icon, then inserted it as, then saw the physical icon as in the image below

3. Then rebuild and everything was ok

I think this might help you:

Add a valid icon in the Project. Then left click to select the installer project (in solution explorer). Go to properties window, change the AddRemoveProgramsIcon. Browse and set it to the newly added valid icon.

Alternately, just change the AddRemoveProgramsIcon value to "None" in your install project, if you are not ready to specify an icon file yet.