The other day i was trying to replicate the problem you mentioned, and honestly i was not able see where is the problem
Im not trying to sabotage your report or contradict you, im mostly trying to act as an intermediate in between you and zar because i think there is a misunderstanding here, there is a detail a bit confusing about how the favorites work, let me explain it...
The way how the option "favorites" inside the "filter box" works is different in between the UI's
In the LIST, GRID, FLOW2D/3D it means "display
only favorites", Lets say, if you have the options configured this way is going to display the PS3 games that was marked as favourites
only
FAV = YES
PS3 = YES
PS2 = NO
PS1 = NO
PSP = NO
But you need to mark some PS3 games as favourites before configuring it like that (by pressing triangle on top of the game icon) and selecting the option to add/remove the game from your list of favourites
Incase you dont have any game marked as favourite, when you configure the "filter box" in the way i said you are not going to see any game in the screen. This is when is displayed the warning message "No games found, check your favourite lists and your game paths" (or something like that)
Basically... this warning text indicates the user that there is something wrong in his setings (in your case it seems to be because your favorite list is empty)
That warning message is needed, it was implemented on purpose because the previous managunz versions without it was confusing (and as far i remember there was one managunz version where it was crashing under that conditions)
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In the XMB UI's it works a bit different, because the "favourite" option inside the "filter box" means "display
also favorites"
Lets say... you have only 1 PS3 game marked as favorite + some more PS3 games not marked as favorites, and you select this options:
FAV = YES
PS3 = YES
PS2 = NO
PS1 = NO
PSP = NO
The XMB UI is going to display all your PS3 games under PS3 "category" icon (the PS3 game marked as favourite + the other PS3 games not marked as favourite). And the favourites "category" is going to display only the PS3 game marked as favorite
In other words... the PS3 game marked as favourite is displayed 2 times, one under "Favorites", and other under "PS3"
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This small difference about how the favourites works in between XMB UI and all the other UI's (LIST, GRID, FLOW2D/3D) is a bit confusing in my oppinion and maybe is making you think that there is something broken but i dont think is broken... is just that is a bit confusing

I been thinking in it since some time ago but the posible solutions to make this a bit more intuitive requires some discussions
Im talking about it now because im wondering if your report is related with this problem and to summarize it, usually writing/talking about a problem helps a lot to have a better understanding about where is the root of the problem and the posible solutions
This small wall of text i just wrote surelly is helping me to organize my thoughts about this... i dont want to suggest any change to zar yet related to this but yeah... this problem has been rolling around my brain since some time ago