|Had the same problem and found the following fix this evening:|
It requires editing the registry so follow the instructions carefully.
Start -> Run
Next, browse through the registry to:
Double click on Favorites in the right pane and update the data field with the path to your favorites folder.
Next, you'll also need to update:
HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\Explorer\User Shell Folders\
Double click on Favorites in the right pane and update the data field. Typically this will be:
Worked for me!