I put crushed ice in a measuring cup and add iced water. Then I have the 1 cup measure of liquid, part ice and part water. My problem with the recipe as it reads is that you have no definite measure of water. If you have small cubes more will fit into the cup, and if you have big cubes, less will fit. Jell-O is usually 2 cups liquid (was it a small package, I forgot?). The pie sounds good and measuring the usual 2 cups liquid plus the Cool Whip, peaches sounds like it would make a good pie. If yours won't set, I'd say you didn't get the gelatin dissolved well. If I'm in doubt, I stick my finger in the bottom and feel for the grit (undissolved gelatin). That sounds gross, doesn't it?