Does that icon show up back in the Palette when it goes missing from a toolbar?
The drop-down that appears when you open "Customize" for the Toolbars is known as the Palette.

https://support.mozilla.com/en-US/kb/How+to+customize+the+toolbar

No it's not showing up now - that's the part of the current problem. When I've "lost" it before, I been able to put it back. This last time I "lost" it, it's not showing up in the palette.

The icon does show in my add-on extension page but not on the tool bar - where I want it - and it's not working.

Try http://kb.mozillazine.org/Corrupt_localstore.rdf
(caution: do not delete the localstore.rdf file in the Firefox program installation folder)

Note:
Deleting the file localstore.rdf will reset the customizations of the toolbars to the defaults.
You can rename "localstore.rdf" to "localstore.rdf.sav" to test if that solves it.
Then you can restore the customization by copying "localstore.rdf.sav" to "localstore.rdf" if it didn't work.

Ok, I hate to be dense here but I'm confused - I don't even spell "technical" very well :). You said to delete the .rdf file but right above that under the url, it says "don't" delete it. I did go to view and customize toolbar but this pencil icon is still not in the list. I know it has been before because I have had to "reput" it on the toolbar.

Is that extension enabled??

You need to delete or rename that file in the correct location. That file can be in two or more locations in Firefox related folders on your drive.

Open up Help > Troubleshooting Information..., hit the Open Containing Folder - that will open your Profile folder, then close Firefox while keeping your Profile folder open. Delete or rename the localstore.rdf file in your Profile folder, then start Firefox. A new version of that file will be automatically created and you'll have to re-do all your UI customizations again. Hopefully that will restore that "pencil" icon and you'll be able to move it to the toolbar where you want it.