Further down the Internet Options page you will find a "Clear History" button.
The drop down menu will only contain urls you type in, not ones selected from links or favourites. I think.
P.S. Don't forget to clear the Start > Documents too; that can get fairly embarrassing. Ohh, and don't forget to clear the Temp Internet Files. Oh, and if you're using WMP, don't forget to clear the recently played list; just in case something naughty miraculously makes its way in there. Oh, and........
