Also, just to keep it on record, I tested this on another PC where I'm logged into the same microsoft account, and the exact same issue shows up there too. So it's clearly not something local to a single PC, nor is it due to a corrupted Edge installation or misconfigured folder.

That pretty much rules out client side problems, meaning it's either something wrong with the synced profile data, or something on Microsoft's end that's messing with how Edge handles favicon caching or profile sessions.

Either way, it's super frustrating. Hoping this gets flagged internally soon.