I am trying to make a custom item and I want to give it an icon and mesh - already in Oblivion; I'm not making a new one. Anyway, I click on Add Mesh or Add Icon in my new item, and there is no folder shown that contains the default Oblivion icons and meshes. Where is it? I've read they are contained in the .bsa files, but I can't select those when I'm trying to get an icon or mesh.

You need to unpack the files you want from the BSAs before you can use them that way. If you want to use an already existing item that has the mesh and icon you want, just change the EditorID, make the changes you want to the stats and select "Okay". You will be asked if you want to create a new form. Select "Yes" and you will have a new, separate item. If you still want to unpack the files you'll need, use the BSA utility in OBMM.