Remember that MS is quite specific about the acceptable format of the contents if the favicon.ico file.
If the image you've created doesn't exactly suit their specs, then IE won't show it.
Also, IE doesn't display a favicon as soon as it knows there is one. It must first cache it ... and to do that requires bookmarking the site. After that the favicon will show in IE whenever you visit the page ... until you empty your browser cache at least. Then you must bookmark it again.
Firefox does it smarter ... and caches it and immediately shows it as soon as it knows there's an image to display.
If it's just a bookmarking thing, you can fix it by bookmarking the site.
One way to attempt to test what's going on is to directly surf to your favicon file with your browser. Type in the URL to your favicon.ico file: http://YOUR_DOMAIN.COM/favicon.ico
See what happens. it should show you an almost-blank page with your favicon in the top left corner ... very tiny.
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