Please read this thread, it'll give you an idea why:

https://support.mozilla.com/en-US/questions/890741

I had the same problem. Disable Favicon Picker 2 and problem solved. Too easy :)

I have the same problem, but note: the problem is NOT that the dotted-line box is showing up per se; it's that favicons that used to appear on bookmarks no longer do so, even though a valid favicon exists for that Web site, and even though I visit the Web site again by clicking on that link and even though about:config confirms that favicons should be showing up.

In other words, favicons are not being saved or refreshed; they are all turning to the dotted box icon and staying that way, no matter what.

To repeat, the dotted-line icon is not the problem; it's the loss of favicons that appeared properly in FF7 and the failure in FF8 to update favicons after clicking on links.

In a possibly related bug, the Adblock Plus icon no longer appears in the Navigation Toolbar, even though about:config confirms that it should and even though the option to display in the Navigation Bar is checked and even though an icon does appear in the Status Bar and even though the add-on is installed and otherwise working normally.