I stumbleupon an article, Windows XP Favourites Redirection – ADMX files, at RAMBLINGS OF AN IT CONSULTANT.

It describes how to enable folder redirection (similar to what was introduced by Vista) for the Favorites folder on Windows XP, by using custom group policy ADM/ADMX. I have not tried it out my self, but it seem rather straight forward.

Can come in handy when moving users between Windows XP and Vista/Windows 7.