When I receive custom emoticons from my msn contacts in Pidgin, they just show up as a red placeholder (like the image cannot be shown). This doesn't happen when I use it on windows at work. I'm using Pidgin 2.7.11.
It looks like there's an open bug (with its implementation in progress) about this issue. I thought it was a problem of missing dependencies, but it's not a Ubuntu-side problem. Please refer to: http://developer.pidgin.im/ticket/12977 for more information
Hope this was helpful, Mat.
PS: and hope it will be fixed soon :P
Update: I've found a workaround to use custom emoticons and file transfer of msn in pidgin. I downloaded from repositories the plugin 'msn-pecan', which implements a newer version of Windows Live protocol. Once you added your accounts, you have to switch the protocol from MSN to WLM and ... here you are! Custom emoticons and file transfer p2p :)
i preffer to use this emoticon pack, they show up correcly on msn and other protocos