2) save it as a app.png, where "app" is replaced by the application's name
3) create a "theme" folder (it can be called whatever you like) that contains these items (use the exact spellings):
-Dock.png (an image that will be your theme's dock)
-Icons (a folder with your custom icons in it)
-Wallpaper.png (an image that will be your theme's wallpaper)
4) Use SSH to put the entire theme folder into this directory on your iPhone: /private/var/mobile/Library/SummerBoard/Themes.
5) Go to summerboard, and load your new theme just like any other you'd get from installer.