[Updated Aug 3]
The Day Planner widget that comes with the Yahoo! Widget Engine (a.k.a. Konfabulator) can work with iCalendar (ICAL) files, but this feature has been hidden in the Windows platform since Mozilla Sunbird stopped using iCalendar files (.ics) for storing calendar data.
All the tips/hints/fixes/other information posted here are at your own risk. Some of the steps here could result in damage to your computer. For example, using a Windows registry editor like RegEdit could result in unintended serious changes that may be difficult or impossible to reverse. Backups are always encouraged.