If you want the Favorites sorted automatically (on-the-fly sorting), try this advice from Keith Miller:
Open Registry Editor (regedit.exe) and navigate to:
HKEY CURRENT USER\Software\Microsoft\Windows\CurrentVersion\Explorer\Menu Order\Favorites
and delete the value named 'Order'. Also delete this value for any subfolders. Then, with the favorite key highlited, click on Edit > Permissions and deny 'Full Access' to Administrators, yourself, etc. This will prevent the key from being automatically recreated.
Bruce, XP Pro doesn't offer that option it seems. However I solved the problem using the registery key Ramesh offered. It doesn't take effect until all browsers are closed and you reopen IE.
You have to open Favorites from the top Toolbar in order for Sort By Name to
work.
Sort by Name doesn't work in the Favorites pane.
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