OK, figured out what it's doing. It is creating a "stack" of the files and folders within the folder rather than the icon of the folder. It is always a 'stack', whether just sitting in the dock or expanded into 'stack' view. Depending on the size of the icon for the first item within the folder, you may actually be able to see 2 or 3 additional icons sitting behind the front one. If you change the 'Sort By' option, you'll see that the front icon may change.
What I have done is created a folder within my Apps and my Games folders called '1'....then changed it's icon to the one I want displayed in the dock.... and selected 'Sort By...Name'. Since this folder will be the first item within the respective folders, it is the one in front. I can live with that.
and, btw, for it to work, you have to remove the folder from the dock and then put it back after you have changed the icon. It appears that once a file / folder is in a stack, the original icon for that file/folder is the one that is displayed in the stack whether you change it or not.