Here's an idea off the top of my head that might work, but I haven't tested it.
1. Browse to your favorites folder using explorer.
2. Rename or delete your links folder
3. Create a new text file called Links.txt
4. Remove the .txt extension. Windows will yell at you but just say yes.
5. Right-click on the Links file, and set it to Read-Only, and Hidden.
Theoretically this should work because Windows won't be able to overwrite it (it's read-only), and you won't see it on your favorites in IE (it's a hidden file).
Yeah, I've tried what kingnothing described before and it works just fine as a simple fix, although I didn't need to go through the extra step of making a new file and all, I just hid the Links folder and it never showed up again.
... and let that be a warning to all you other irritating system folders.... I am watching you!!!