You could try this:

Start Windows Explorer.

Move to your user profile area (e.g., C:\documents and settings\john).

Open the Favorites folder.

Right-click the Links folder, then select Properties from the context menu.

Select the "Hidden" check box, then click OK.

Start IE, click favorites, right click the Links folder and choose "delete."

Re-start IE ... no links folder!

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If that does not work, there is a way to remove it by going into the registry - but I usually don't recommend that.