I was looking for a more programatic way to disable or hide the folder for all users on our network at work. Thanks though.

Yes, if you go to the View Tab, on the Navigation Pane button you can uncheck "Favorites" and it won't appear.

You might also see if starting Outlook with the /ResetNavPane switch helps with your problem. See if this helps - http://www.officeforlawyers.com/outlook/tsol.htm#CLS