Just a minor itch I ran into today which I felt needed to scratch. I wanted to collect all my image resources into one place in a Windows Phone 7 app (a folder called, for the sake of argument, “images”). I knew that SplashScreenImage.jpg could not be moved but I went ahead and moved everything else and made the relevant changed to WMAppManifest.xml.
This works just fine for BackgroundImageURI but not for IconPath. The project will build but when you try to deploy you’ll get the error “Icon file images/ApplicationIcon.png not found. Make sure that the file is present in the application.”
It seems you can change the name of the application icon, but not its location. I believe it’s possible to make this work by manually copying files into the xap but that defeats the purpose of what I was trying to do so I’ll just have to stick with it in the root I suppose.