How to show website favicons on the Vista desktop

If you right click on a website in Internet Explorer and select Create Shortcut you will be asked. "Do you want to put a shortcut to this website on your desktop?"
In Windows XP the shortcut made use of the website's favicon. But in Windows Vista as default it only shows the IE7 icon.
But there is a solution. Right-click the desktop, point to View, and then click Classic Icons. The Medium Icons or Large Icons does not work. Not good.

• 
  You can also use the scroll wheel on your mouse to resize desktop icons. On the desktop, press and hold CTRL while you scroll the wheel to make icons larger or smaller.
  

Another thing is that the shortcuts to websites are different depending on how they are created.
If you right click and select Properties>Web Document>Change Icon the path is as following.

• If "Add to favorites" or drag and drop the icon from the address field is used:
  C:\Windows\system32\url.dll
  
• If "Create Shortcut" is used:
  %SystemRoot%\system32\SHELL32.dll

If you try to change the icon that is created as a favorite the icon will not stay long since a functionality in IE7 reads the icon from the website and updates it when needed.
why doesn't the favicon for my site appear in IE7?why doesn't the favicon for my site appear in IE7?
Update: comment by Jeff, Microsoft.

Because the shell asks for 48x48 icons, but favicons are 16x16.  Stretching them would have looked bad.  This decision was made late in the IE7 cycle.  Many people have complained and we are considering a fix for a future release.

Update: This problem has partly been fixed with the introduction of IE8. Website favicons on Vista desktop works better with IE8