I've just spent about two hours trying everything I could find here on getting my favicon.ico to show up.
None of the suggestions worked, including the favicon plugin - it showed up in the admin panel, but not in the browser url edit box.
I tried adding this to the header under the <head> tag:
<link rel="shortcut icon" href="<?php bloginfo('stylesheet_directory'); ?>/favicon.ico" />
I put it in the root dir ABOVE my WordPress install and that worked!