Good luck, I am sorry the solution had such an unsatisfactory outcome for you. Computers are very strange things and one thing is clear to me and that is their individual set up and configuration which can bring some odd outcomes at times.
Just to give all hear an update as to the Favorites link problem with IE7. I have tried anskyber's link and re-installed IE7 - but no different I still keep losing shortcuts at varies attemtps to use them, even ones that I had used say 2 minutes previously.
This is obviously a Windows problem in upgrading from IE6 to IE7.
Until Microsoft recognise that there is a problem and release a fix, then I guess a lot of us are stuck with this problem.