Hey, way to win friends and influence people there, Boatguy.
Check that the folder found at C:\documents and settings\<your profile
name>\favorites contains the links you would expect and appears normally
(folder with blue star). I think it should since you say the browser finds
it but the browser may be finding it under the all users profile. If it's
not in your profile but is in the all user profile, copy it to your profile.
Then check the following key in the registry:
HKCU\Software\Microsoft\Windows\CurrentVersion\Explorer\Shell Folders
Make sure there is a REG_SZ entry for Favorites and that the value (folder
path) is correct.
If both the above conditions are met, it SHOULD be working. If it still
doesn't you might try unselecting the "Display Favorites" box found by right
clicking a blank space on your tool bar then clicking properties and
selection the advanced tab. Follow with a reboot and then re-select it.
This may jar something loose.
