CS3 - Putting Text Into Icons

Ok, I'm trying to make icons using screen caps, but then when I want to add text, I cannot find the basic steps to do the simple things.
I know that my image is 100x100 pixels - otherwise, it's not an icon.
What steps do I go thru to add text to my icon image?  I've found that a font size of 12 on a 100x100 icon is humongous.  But even trying to make it a font size of 2 doesn't seem to fit.

What am I doing wrong?  I'm sure there are settings that PS/CS3 thought  were so basic that they wouldn't insult anyone's intelligence by including them in the Help file or in any of the CS3 books I have.

What image and text/font settings should I work with so I can see my text when I enter it and do "neat" things with it (editing, changing colors, putting it into a path, etc.)?

Thanks for the help!