In the Configurations tab Custom Volume Icon is checked.
When I click on Set Icon… it allows me to choose a .PNG file or a .ICNS file but then the file dialog stays open as if it wants me to choose yet another file.
No matter what file I choose, the .DMG still has its default volume icon.
The custom icon didn’t appear until I mounted the DMG on another Macintosh. I assume it’s a caching issue that kept the generic icon on the machine with DropDMG.