When you import the Internet Explorer 8 Beta 2 bookmarks file to a system running Internet Explorer 7 or earlier, the following error occurs when you click Finish in the Import/Export Wizard.

I could fully reproduce the problem in my Windows XP SP3 system running Internet Explorer 7. The source computer runs Windows Vista with Internet Explorer 8 Beta 2 installed. Thinking that this could be due to incorrect formatting or missing tags in the HTML file, I opened the file using Notepad but couldn’t find any errors in it. Eventually I spotted that this issue is caused by incorrect encoding used by Internet Explorer 8 Beta 2 to create/write to bookmark.htm. With that said, the fix is very simple.
To resolve the problem, save the bookmarks file as ANSI text. To do so, use the following steps:
Start Notepad, and then open the bookmarks file (bookmark.htm)

Click Save As on the File menu.
In the Save As dialog box, click ANSI in the Encoding list, and then click Save.

Click Yes when prompted to overwrite the file.
You should be able to import the bookmark file successfully using the Import/Export Wizard in Internet Explorer.
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OH YES – Fantastic!!!
Thanks so much for the solution. Was pulling my hair out till I found this. Thanks again!
Superb Solution…!!! Many Thanks…
you are the man! thanks for posting this solution to the importing favorites problem to those of use with XP.
Excellent, it worked, thanks.
I was facing this problem while importing a bookmark file on my laptop having IE 7. The bookmark file was created some times back from my Office PC (although I don’t remember the IE version over there).
Perfect!
NOICE! Saved a user his Favorites.
Great solv for this problem ! Thx a loooot !
This worked perfectly…many thanks for your help!
Jo
Thank you so much for this tip…worked like a charm!!!