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IE7 fails to launch after updating Favorites folder

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On PC1 running XP SP/2 I removed all the old favorite links from the folder and then moved to that folder a new set of links that I copied from PC2 also running XP SP/2. Now on PC1 IE fails to launch. I double click on it's icon and the hour glass appears but seconds later it goes back to the default arrow and IE does not launch.

Why would updating the Favorites folder have any affect on IE as to whether it will run or not?

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