Welcome to WebmasterWorld brandozz.
Sorry, we prefer to stay away from links to examples. The problem is once a problem has been fixed they're usualy updated or removed from the server. That's no help to someone looking at this thread in the future.
Your issue is that IE isn't showing a transparent background on your favicon.ico file. Is it displaying properly in other browsers?
We've had a bunch of threads on the topic of favicon.ico over the years. I would first suggest you take a look at some older threads to see if your question hasn't been answered before: