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I meant that I don't understand your IE issue. Which version is this? Can you screen print the problem? Do you have more than 193 items in the root favorities folder? Could you be logged in to a different username/domain?
Nick, IE6.0 in XP does the same as Word and is turned off in much the same way. IIRC, in IE Tools -> Internet Options -> Advanced, untick the box "Enable Personalised Favourites Menu" and click "Apply". If it's not that one, I'll have to get back to you.