I just tested the favicon upload, and it worked fine. I've attached the image that I used for testing, if you won't to try it. I just found an image, downloaded it, Converted it from a png to an ico file here
http://icoconvert.com/
Then uploaded it. I do have this code in the head section of my page settings. Some say all you need is to have the favicon in the root of you directory. There are posts related to the favicon.
<link rel="shortcut icon" href=yoursite.com/oxwall/ow_userfiles/plugins/base/favicon.ico">