You could try this...
Open Internet options by clicking tools (upper right-hand corner), then click 'Advanced', which is along the top.. Near the bottom of the box you'll see a button for re-setting the settings for Internet Explorer, try that. Again let me know how you got on..

I also found this on your type of problem:
VistaBase » Blog Archive » Why can’t I save Favourites in Internet Explorer 7?

Again, another page which may be of help:
Personal User Shell Folders - Move Location - Vista Forums

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