When my site launches I will most definetly make use of it...why not? It's very little work and can make quite a difference...and if some form of a logo is used, it must help build your brand to some degree.
It's not dead, just not revolutionary anymore...word has gotten out, so it's no longer news. I know SitePoint uses it, Yahoo uses it, as well as many other large sites. I believe it will become fairly common practice, but you'll always have those who shun it, even if they have no reason.
Imagine you had a huge list of bookmarks which one are you more likely to click on the 100's that look the same or the one that stands out. I don't think I really need to say the answer.
There are problems with the favicon though, if you have already bookmarked the page it wont show the favicon or when you clear the temporary internet files the icon disapears but I still think most webmasters should take advantage of it as it is so simple to do.
Yeah, I hate how it doesn't work in IE 5.5, which is what I mostly use. I've almost forgotten about it I don't use Favicon 'cause I'm too lazy most of the time...
Bookmarks