You should be able to do what you want.
I have System Folder / Apple Extras / Applications / Utilities folders all at the top level, and with appropriate icons.
This tends to be a do once and forget operation, so I don't recall any issues.
I hate the way Apple has messed with this and used that untidy 'Applications (Mac OS 9)' label. I quickly trash it.
I will accept giving an OS control over the structure of a system folder, but I want control of everything else!
Some application installers will recreate that stupid Applications (Mac OS 9) folder, so you tidy up again.
Anyway, for copying icons, you have to do a File:Get Info on an icon, click the icon, copy it, then do a Get Info on the destination, click the icon, and paste.