hi I think you are missing the simplicity of this - xara does everything after you have designed your favicon

1 design your graphic lets say a square with a W inside it - select the box & text together and group it
2 select the group and click the name icon (looks like parcel tag) type favicon and then click add then close
3 position the graphic at the side of your website on the background
4 publish your site

that should do it

cheerz