Do Picons work on DM500S with Catseye settings

yes they do

you need 71x53 picons and need to add the m to user/share/picon

then they should work

but remeber the skin needs to support picons too

one other thing to remeber is dm500 flash size is pants and you wont get many picons

i cant get a full set of sly uk on one so i doubt you will get a motised set in there

If you talking about dm500 E1 then just download picons (as silverfox0786 wrote) 70x53 you may also use some modified e1 skins which uses 100x60 picons but most of them uses 70x53 and send them per ftp in:
var/etc/picons-gemini
or var/tuxbox/config/enigma/ depends from images you are using!!