%USERPROFILE%\Favourites. Folders of favourites correspond to directories there. This is all easy to deal with, and other browsers can easily import it.
Ordering of favourites within a folder is stored separately, in
HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\Explorer\MenuOrder\Favorites. It uses an undocumented binary format. If you want to import into Internet Explorer elsewhere, you can simply export that branch of the registry using regedit, and then import it to restore the order. Exporting the ordering into other browsers is more difficult.
A CodeProject article explains the registry format. The code there is compatible with Windows XP and Vista, but not later versions. I also had some other problems, which I listed in a comment over there. Nevertheless, the code there was a very helpful starting point and only a few changes were needed.
The problem then is using the bookmarks.xml file, which is in XBEL format. Firefox is incapable of reading that format, and the XBELFox extension didn't work either. Debian had some XBEL tools in the past, but those depend on Python 2.1. I eventually ended up installing Konqueror and exporting to Mozilla format from there. That may seem like a ridiculously inefficient method, but it's much faster than spending more time searching for a suitable format conversion utility. Afterwards, it was easy to use dpkg.log to purge Konqueror and all of the KDE stuff it installed.