my desktop icons are normal size, but the picture representing the shortcut i.e. MSNBC , is very small in the center of the icon

Hate to bump such an old thread, but it is still unresolved several years after the original post, probably because no one really understood exactly what was going on.

Think I may have finally stumbled on the root of this problem, apparently Microsoft has never really bothered to seriously look into this.  It would appear they have dramatically handled how favicons are saved and/or how they get rendered on the shortcuts.

I just noticed on my new Windows 8 laptop that all the cached favicons are treated/saved on the hard drive as a 48x48 pixel icon file, with the 16x16 or 32x32 pixel image in the center.

So, what is happening is Windows is loading that 48/48 picture with the graphic only filling 1/4 or 1/2 of the picture, the rest of the frame is filled white.

I stumbled on this while trying the method mentioned earlier about saving the favicon manually, then changing the shortcut to point to it.  When I went into my shortcuts cache folder for Firefox, I found some icons in there already.  I pulled them up and every single one was a 48/48 pixel image, with the tiny 16/16 icon in the center.  I went to manually save the favicon for the Honda Ownerlink.  It's just the Honda "H" emblem, so hardly noticable at 16/16 centered in a 48/48 frame on a size 32 icon at 1920/1080--even on a 17" screen.  Went to the site, saved the favicon manually as hondaowners.ico.  This was saved as a full framed 16x16 pixel image.  Changed the shortcut to use that as the icon, and it pulled it up to the original full-framed image I had on XP Pro.

Again, my Shell Icon Size in Windows 8 is 32 (small icons).  Best guess is it is only doubling the size of the manually saved icon at this size.  Yes, it is a bit blurry, but at least I can recognize it at a glance on my 1920/1080 17 inch laptop screen---not so much when it was 16/16, reduced inside of a 48/48 image.

I restated those dimensions again for emphasis to better illustrate the issue--you are downsizing a 48/48 image to fit the smaller icon frame, that already has a tiny image (16/16), and rendering that at full HD resolution on a 17 inch screen (gaming class laptop).  In other words, it is making the images VERY small, and hardly discernible.  However, when it is a 16/16 image, getting stretched up to a size 32 icon, it really does not get all that fuzzy and is MUCH easier on the eyes.

So, in short.... this in fact DOES appear to be  Microsoft snafu.  They need to save the favicons at their ACTUAL SIZE and not cram them into the 48/48 thumbnail template.  They need to save them as they are presented, and then upsize them to the 32/32 or whatever size that is set by Shell Icon Size in the WindowMetrics key--may have been how they did it in previous releases of Windows At the very least, they could stretch the image to 32/32 and save it that way--the point is NOT to save it as 16/16 centered in a white 48/48 frame.