Recently a commenter posted that they were unable to get Favorities sync to work (or show as an valid option on the toolbar). Found a recent post by a Microsoft dev who debugged the issue. Read more at http://blogs.msdn.com/john_pollard/archive/2008/12/22/fixing-an-issue-with-windows-live-toolbar-and-favorites-sync.aspx. Hopefully this solves your installation issues.