After some testing with a default install of Windows 7 I was able to reproduce this issue.
The Default Favorites appear to part of a feature titled "Local Packs". You can either disable the Local Pack or remove it from your WIM. A decent article describing Local Packs is available here.
mctadmin.exe /r US, as an Administrator, worked on my test install.
I was not able to reproduce the same issue under Windows XP SP3/IE8
It's worth noting that this did not appear to remove the default MS Favorites folders. Removing the Local Pack allowed the user to delete the default folders and they did not reappear upon restart. Should you want to purge the default folder for existing user profiles you may want to use a simple logon script.
IF EXIST "%USERPROFILE%\Favorites\Microsoft Websites" RMDIR /S Q "%USERPROFILE%\Favorites\Microsoft Websites"
IF EXIST "%USERPROFILE%\Favorites\MSN Websites" RMDIR /S Q "%USERPROFILE%\Favorites\MSN Websites"