Looks like there are two ways for Internet Explorer to keep its favorites list: in "Windows/Favorites" folder and in registry "HKCU/Software/Microsoft/Internet Explorer/Main/FavouritesEntries".
The information there seems duplicated. I would like to know, how does internet explorer builds his favorites list? He prefers registry settings or folder settings? And how does it handle the situation, when registry list does not match folder list?