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Did you figure it out? It's actually rahter simple I find... I collected the modules I wanted last night and I've already got my own XOOPS powered site looking somewhat unique. I do have my own problems, but hey- that's why I'm here.
Anyhow... to see if I can help you out... figure out which "theme" you are using. Go into your FTP client, navigate into that specific Theme directory, and right there you should see the favicon. How, what I picked up from someone else (
http://www.warpigw2.com) is that you have to go into preferences (admin> system> preferences> General Settings> edit) and make sure that in the "Update module template .html files from themes/your theme/templates directory?" section you have selected "YES" ... that's the little secret I figured out. it allows for REcaching of the system.
Select "yes" refresh, it should work. So long as the right favicon is in the proper theme folder. Once you are done, you can return the "Yes" to "no" and remain all safe and secure.
Hope that helps. I'm a newB here, so I might not understand things right, but from what warchild2 said, that seems about right.
~M