hartlepoolmonkey,
When I upgraded to Safari v6.0 for Lion I also came across this issue. So I thought it must be an anomaly, so I figured I would just take the plunge and upgrade to Mountain Lion to see if it resolved the issue. Well it did not. (By the way ML is quite Nice.)
In Safari 6, I will certainly miss losing the "RSS" and "Activity" features of the previous version. But I am Really Upset At Losing the Web Icons/favicons. All 3 features/functions desperately need to be added back into the next update.
If you go back to the "Reset Safari..." per you screenshot and in the bottom left corner "select" the little help ?. You will see in the "Help" description that "clearing" the history does indeed "remove web site icons."
I think this is a Faux pas from Apple and violates or deviates from their own GUI guidelines. Or at the very least falls upon what I call the "Do No Harm" guideline.
Apple long ago knew that humans are visual, hence one of the reasons Apple created the Mac OS with Icons. The OS for the Rest Of Us. Other wise we would all still be using "command line operating systems and applications." (Please don't get me wrong, The Terminal and Command Line are still great ways to get things done - That's Another Discussion)
My Bookmarks are very well organized and I could instinctively/visually go right to the Bookmark/url of the website (Including the Apple Web Icon) I wanted to visit. Now I see a bunch of generic "Blue World" Web Icons and this "Is Not" intuitive.
Anyway there are Other Apple Discussions/Threads with different titles going on describing the same issue.
In the "Safari6: favicons slow to load and don't 'stick' (remain in bookmarks) Discussion user "stepg" posted something we should all take advantage of:
stepg
Re: Safari 6: favicons slow to load and don't 'stick' (remain in bookmarks)
Jul 30, 2012 5:42 AM (in response to hockeybear)
I'm sure that Apple would welcome everyone's (polite and constructive) feedback:
http://www.apple.com/feedback/safari.html
Thanks hartlepoolmonkey for a great discussion - jkd032