look at this website
http://www.bnr.bg/
the method it uses to display its favicon is the line in the header:-
<link rel="shortcut icon" href="/bnr/70/favicon.ico" type="image/x-icon" />
now look at the image file:-
http://www.bnr.bg/bnr/70/favicon.ico
This is simply a gif, saved with the wrong extension, I THINK.