There is my ICO format plugin <http://www.telegraphics.com.au/sw/#icoformat> for Photoshop.
Illustrator is supposed to support PS plugins, so it should work. However, that support was rather buggy in Illustrator versions that I tested (v10, I think); CS and/or CS2 may do better. Please contact me (***@telegraphics.com.au <mailto:***@telegraphics.com.au>) if you have results to report (good or bad).