1) I don't know of any "approved process" apart from specifying an icon in the project options and, as you have discovered, that doesn't always work. Here's why:
The default icon to use as the application icon is determined by Windows. Delphi has no control over it.
Windows simply selects "the first icon" as the default application icon. The order of icons are determined by their resource ID/name (AFAIR this is only true for Delphi because Delphi sorts the resources at link time (which is actually a good thing as the alternative would means we had no control over what icon got selected (as we have no control over the order))).
The Delphi project icon is always named (by Delphi) "MAINICON". If you add another icon to the project, and the name of that icon is sorted before MAINICON, then this icon will be ordered before MAINICON and will be selected by Windows as the application icon.
For this reason I usually name my application icon "A" and add it as an external resource file to my projects. This way I don't have to worry about what other icons there might be added by 3rd parties (or other developers) and what their names are. The MAINICON I just ignore or load with the same icon as the "A" icon.
2) The icon size used for the forms depends on the size of the windows caption area, which depends on scaling/zoom, font sizes and so on. The icon is selected by Windows from the different sizes available in your application icon (or whatever icon you have associated with the form).
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See also: forms.pas (search for WM_SETICON and WM_GETICON)