My Favorites are not hidden and is a bit baffling as it was working fine before latest update. Also just testing to see I have noticed something.
When i am inworld, my preferences are set correctly in the general tab and the privacy tab to show Favorites at log in. But, when I open preferences from login screen, i notice that the show favorites box is not checked and the 8 center boxes, on privacy tab, from " only friends and groups know i am online" to " add date stamp" are in accessible to me. So I am guessing i am just gonna have to live with it and hope when next version comes out it will correct.