When you click the Organize Favorites option under the Favorites menu in Internet Explorer, the following error occurs and the Organize Favorites dialog appears blank as in the graphic below:

This happens due to missing Microsoft JScript registration. And the fix is to register the DLL.
Windows XP
1. Login to an account that has administrative privileges.
2. Click Start, Run. Type the following command:
3. Press {ENTER}
Windows Vista and Windows 7
1. Open an elevated Command Prompt window. To do so, click Start, click All Programs, click Accessories, right-click Command Prompt, and then click Run as administrator.
2. Type the following command:

3. Press {ENTER}
You should see the "DllRegisterServer in jscript.dll succeeded." message box.

Logoff and login back. See if you’re able to open the "Organize Favorites" dialog in Internet Explorer successfully.
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Thanks this answer fixed the problem for me.