It’s common to use the “Links” toolbar in IE to keep your favorites handy. What’s great is that you can drag-and-drop into the folders directly from the link without having to use somewhat-clunky Add Favorites dialog. Drag, drop, and you’ve got your bookmark.
Having just purchased a new PC, I copied my Favorites from my old machine to the new and encountered a well known issue with Windows Vista User Account Control. Skip to the end if you just want to fix your problem. If you’re curious about the details, here’s the rough outline: