After watching how bluegills and crappies take a bait via my ice fishing video camera I will NEVER use anything other that a jig that will present the bait horizontally! Make sure after you tie your knots that the jig sits perfectly horizontal!! This is SUPER important!!!! It's the difference between catching a ton of fish...or only a few!
I like to use Braided line (I'm a PowerPro fan) but with a ultra small swivel and a short (6-8") fluorocarbon leader. Fluorocarbon is nearly invisible under water (also confirmed on camera!) so you can use a fairly high test...4lb or even 6lb. Fluorocarbon paired with braid makes for a very sensitive set up!! Remember...the smaller diameter of your braid and fluorocarbon...the faster the tiny jig can sink. If you use a large diameter line...it will NOT break the surface tension...and that little jig will never get down there! The PowerPro 10lb is a 2lb mono diameter...the stuff is da bomb!
I typically use a 1/32 oz ball big with a #8 hook (from Cubby baits). The largest I ever go is a #10. I prefer natural lead color...but my fishing buddy always uses chartreuse. I also use 1/16 oz also.
I prefer to flat line it...casting without a bobber...finger on the line...and give a light set on any tick. This setup works to about 8' or so. If necessary...add a very small spitshot above the swivel (on the braid). But I would prefer to go up a little on the weight of the jig instead.
I would thread the ice pick onto the jig so it sticks out like a small minnow. Also....mold some up in RED!!! To look like "blood worms". Black is always a good color also. Chartreuse is my buddy's favorite color. I wonder how this bait would do as a mini wacky?

Using the same setup...you can go a little heavier on the jig (crappie size) and vertical jig. I thought I knew how to do this until I hooked up with a guy a few years ago that was the master! He only vertical jigged and he could really catch a ton of BIG bluegills.
I catch a lot of nice bluegills, crappie and yellow perch (not to mention bass!) on the above method using a slighter larger (crappies sized) jig and the 1.75" carrot. I WILL have the 1.75 inch Small Fry mold before the ice fishing season!!
If you use a bobber...use the smallest you can..and normally set at the first bite.
The other HUGE revelation last year (due to the camera) is that big bluegills are in very shallow water...even under the ice. We caught some big bluegills and crappie in 4-5 ft of water (under the ice). Try an area that had Lilly Pads until ice up.