Ringing a bell here as it appears to be a bug in Windows Phone 7’s Internet Explorer that generates an error message upon editing an already added Favorite. Don’t worry if you see it, you definitely have enough memory for saving a Favorite, just bear with us.
This has been verified on both a U.S. Samsung Focus and a European LG Optimus 7 so we’re thinking it’s a build bug. Navigate to any page of your liking using your device’s Internet Explorer. Add that certain page to your Favorites — we’ll use pocketnow as the example but the bug appears with any other names. So we now have “pocketnow” added to Favorites and upon editing the Favorite name to “PocketNow” (from bottom favorites icon, long tap favorite name, edit), the system displays the error message captured above. Looks like you can add or substract from the Favorite name but anything you do to the characters (without changing the name), capital letter or lowercase, will result in that specific error. Current workaround is to rename “pocketnow” to “pocketnoww” — or anything else — and then rename again to “PocketNow” or just make sure to properly name the Favorite right when adding it.