[Paronald]

When adding/creating Favourites they will only appear in the My Documents folder but not in the IE7 Favorites list.
You can drag them from the My Document/Favourites folder to IE7 and that seems to work fine initially,
After a couple of days they will disappear from IE7, but still be visible in the My Documents/Favourites folder however, they don't work.

[DaveA]

Why are you looking at the "My Documents" folder on a Vista machine?

You need to be looking at the "Documents" folder under your user name.