Did you put favicon.ico in site root (not in store directory) ?
<link rel="shortcut icon" href="/favicon.ico" />
[EDIT]
I see what you did:
<link href="http://www.mycharmsonline.com/charms.ico" rel="SHORTCUT ICON" />
change this to:
<link href="/charms.ico" rel="SHORTCUT ICON" />
(no need to use
http://domain.com/ in a link on your site. You should always use absolute links on the same domain when possible.)
PS -- please update your forum signature with your version of x-cart
http://forum.x-cart.com/profile.php?do=editsignature