It now seems to be possible to create your own custom themes in Windows XP.

Also note the lack of any Active Desktop bullcrap here. They removed the tab, and any terminology referring to it has been changed or removed. This does not mean that Active Desktop is gone, the settings are still accessible, but it's just a little harder.

Speaking of themes, Windows XP introduces a new "Luna" interface in a default blue color. This theme has been dubbed "Bozo the clown" by many, and it replaces the previous 3D industry standard with a flat appearance that appears to be more geared towards web pages than anything else.

Since this new theme actually uses graphics instead of colors to draw itself, it can't be completely customized. Instead the only options are "Default (blue)", "Olive (green)", and "Silver". Like purple? Forget it, not going to happen unless you turn off the fancy theme and use the classic theme, but you bought XP for the fancy colors, right?
Ah well, this now gives Microsoft something to add to the next release of Windows.

The Explorer has been changed slightly. The side bar now contains some hyperlinks to various options and other things, and Microsoft added both a "Thumbnail" and "Filmstrip" browsing mode.
Thumbnail view allows you to see humongous previews of your images, and also cover art or a preview of certain documents. It also, on a folder filled with files, will show you a preview of the files in that folder.
Filmstrip will allow you to flip through photos and cover art and all that what not using a few controls. It is basically like a photo viewer shoved to the background of an explorer window. There is no animation to the sliding, nor is there any clicking and dragging, but you can rotate images.

For comparison, here is a screenshot of the "Cover flow" view in Mac OS X 10.5.

As you can see, the Mac OS implementation of this, like so many other things, is so much better. There is a 3D animation to the flipping, and you can drag the previews around to do file operations.
However, the point I want to make is this: Windows XP came out in 2001. 10.5 came out in 2007. So it appears that, for once, Apple is the one copying Microsoft. Although once again this implementation is better than Microsoft could ever make one.

So Windows XP now lets you change icons for folders. But, since they also introduced thumbnails, that makes this thing now far more complicated since both are treated as different things (even though they are basically the same), and icons can be converted to thumbnails, but it can't go the other way around. So you have to select both an icon and a thumbnail, and it even offers some templates for folder thumbnails!
As usual you still have to browse for an icon, unlike Mac OS where you can copy a graphic to the clipboard, select the file you want, go to Get Info, and paste the graphic in. And to make matters worse, there are a whole load of icons for files but there aren't very many for folders!