I don't want to log off and reboot to try this, but try these -- In Windows, in the folder, Favorites, try deleting the Links folder. If you've already tried that, and it didn't work, try booting to DOS, and deleting the folder using the command
DELTREE /Y C:\WINDOWS\FAVORIT~1\LINKS.
There are a number of items that Windoze will constantly rebuild/replace on bootup, including subdirectories in TEMPORARIY INTERNET FILES, COOKIES and HISTORY. I have the following lines in my AUTOEXEC.BAT:
@DELTREE/Y C:\WINDOWS\TEMPOR~1\CONTENT.IE5\*.*>NUL
@DELTREE/Y C:\WINDOWS\COOKIES\*.TXT>NUL
@DELTREE/Y C:\WINDOWS\HISTORY\HISTORY.IE5\*.*>NUL
This wipes files that you cannot delete once you're in Windoze, but they work in the AUTOEXEC because it operates in DOS, before Windoze actually starts.

The >NUL statement just tells the system not to bother reporting the deletion to the screen.