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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Great work around! you are my new best friend.
I had exported the bookmark file from IE8 on my old computer with XP to a flash drive. When I tried to import to IE8 on my new computer with Vista I got this error message. Very frustrating. Your solution worked! Thanks.
Thanks so much for this solution, it was driving me crazy. It worked perfectly for me.
Many thanks, this worked perfectly!
Thanks dude, the solution worked like a charm..Excellent resolution..
:-)
Thank you SO much! Worked like a charm!!
Thanks – worked perfectly
But this solution can not fully resolve the problem if there are some Chinese words in this bookmark. May I know how to deal with it?
Excellent suggestion, however, after importing to IE7, I was left with duplicate entries. In IE7, I had to open Organize Favorites and delete every entry, one by one, before importing.
Also the file created adds “.url” to every entry. I had to do the following before saving:
Click Edit and then Replace. In Find What: enter .url. Leave Replace With blank and click Replace All.
Excellent. Very well explained. Thanks very much