Just spent a while adding folders to the Favorites folder in Vegas 5. I quit, then re-started the app and none of my Favorites were there. Thinking I was going mad, just tried again and the same thing happened.
I'm guessing this is a Windows core issue. Favorites is a system folder and expects internet shortcut files.
I just dragged a *.jpg file to Start > Favorites. The *.jpg does not display in any Favorite menu. It does however show if I drill to the Favorite folder in Windows Explorer. So unless you are adding an internet shortcut file to Favorites is seems Favorites will not display it.
Oops, my bad, I just used the My Favorites in V4 by R-click > add...favorites and by dragging and it works. Never used My Favorites before in Vegas. Anyway it functions as expected in V4, can't test V5 sorry.