I'm just copying a reply to one of my posts over in the vista.general forum.
I apologize for any formatting problems, but I wanted to get the attribution
included in the reply.  In short, running ICACLS (see below) should solve
this:

news:uOf3tt5LHHA.3556@TK2MSFTNGP03.phx.gbl...

Looks like the problem is that for some reason the system did not properly
set the integrity level of the new favorites folder to low (this is required
so that Internet Explorer running in protected mode can write to
the folder).

You can fix it like this:

- Open an admin command prompt (right-click Command Prompt and click Run As
Administrator)
- Browse to the folder that contains your favorites folder
- Type: icacls favorites /setintegritylevel (OI)(CI)low

Things should work now :)

The permissions on your favorites folder indicate that the system and all
admins have full control over the folder and anything it contains, and any
authenticated user (including those authenticated over a network) have
read/write/modify/execute permissions (this is just short of full control -
the only thing they can't do is change permissions and take control of the
file).

Just looking at these permissions, things should work fine. However, Vista
adds a new concept called integrity. Every object that has permissions also
specifies what "class" of applications can modify it - if an application
does not meet or exceed this class, then it cannot modify the file,
regardless of what the permissions on the file say.

By default, all files/folders on your computer can be modified by "Medium"
or higher applications. Also by default, all programs run at Medium or
higher integrity.

Internet Explorer, running in Protected Mode, however, runs at Low
integrity. This is one of the ways Internet Explorer protected mode protects
your computer. IE *cannot* modify any data on your computer
unless it is tagged as being accessible to low integrity processes (or it
goes thru a special process that displays a security warning asking you for
consent). In this way, if an attacker takes control over IE, they
cannot use it to overwrite, delete, or modify most of your data.

- JB
 Microsoft MVP - Windows Shell/User"

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