A lot of people have already been doing this trick but I thought I’d share it anyway for those who might now know. Follow these 3 easy steps to maximize your shortcut real estate:
Step 1: Delete the name of your shortcut.
Right click the shortcut, select Properties
Step 2: Set the favicon
Find the URL that has the correct favicon. Sometimes the link you are using may not have a favicon linked to it (like bookmarklets), but this is no problem. Temporarily switch the URL (the Location field) of the shortcut to the URL that has the favicon you want, then use the shortcut to go to the new URL. Firefox will pickup and keep that favicon while you switch the shortcut back to its proper URL.
Step 3: Repeat
Do it for all your shortcuts!
Here is a partial sample of what mine looks like.
How many can you fit on your screen?