Hi TerryMiddleton,
The <link> that you showed is the default that is in the SS Template and isn't valid XHTML (that i know of). Our trusty friend Wikipedia comes to the rescue here (http://en.wikipedia.org/wiki/Favicon#Standardization_and_implementation):
<link rel="icon" type="image/vnd.microsoft.icon" href="/somepath/image.ico" />
I use that for my sites and it shows in IE8... Maybe a rare example of microsoft complying to standards? Either that or because i put my favicons in the root and it finds them :P
If you have an icon in the root (/favicon.ico is a file) then browsers tend to pick that up automatically.
Make sure you have a favicon and it is where you address it, or for ease put it in the root.