The only possible solution that I can come up with is an incorrectly set Shell Folder setting. This occurs because you may have redirected special folders using Tweak UI, or by moving the folder to another location. When this occurs, the User Shell Folder registry path is modified accordingly.
To check if your Registry setting is correct, do this:
Click Start, click Run, type Regedit.exe, and then click OK.
Locate and then click the following registry subkey:
HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\ Explorer\User Shell Folders.
In the right hand pane you should see:
Favorites REG_EXPAND_SZ %USERPROFILE%\Favourites
If not, report back.
Did you try the No add-ons? make a few short cuts and see what happens.
Deleting your Flash cache (that rhymes) shouldn't affect, nor cookies or temp files. Do you use Flash Cookies Cleaner? Just curious.
Norton does have history of deleting Fave URL's, but trying to pin down an exact solution is a no joy situation at the moment.