|You can increase the maximum number of addresses in the drop-down list to 25, but it will only include addresses that you've previously typed in, not addresses that you visited via a web-link or pasted into the address-bar, nor will it include favourites. It seems you have to forego those if you want to have more than 12 entries.|
If that's okay, do this to set it up:
In IE8, click on Tools >> Internet Options
Click the 'Content' tab
In 'AutoComplete' section, click 'Settings'
Where it says "Use AutoComplete for..."
Tick "Address Bar"
Untick the other four autocomplete options indented below it.
Click 'OK' and 'OK' again.
You may have to restart IE8 to see the changes in action.