2 well described and helpful posts on AMO

Thanks to cisengineer

Steps to recover.
Rated 5 out of 5 stars by cisengineer on July 2, 2009
3.5 Upgrade Fiasco Recovery:
1. Uninstall Fast Dial
2. Delete the corrupt "Fast Dial" folder - Yes, delete. Rename doesn't work.
3. Restart Firefox
4. Reinstall Fast Dial (and restart Firefox again)
5. Places to look for your bookmarks:
a. Unsorted Bookmarks
b. foxmarks/xmarks users go to foxmarks.com and log in. They keep backups.
Good luck. This is a great extension! Give the guy a break!

Thank you farf

I got this problem with Xmarks too: blank Fast Dial link in my bookmarks instead of the Fast Dial folder and the error 3 with XMarks which can'T synchronise anymore.
The solution in two steps.
First Step: connect online on xmarks.com Then my bookmarks -> Tools -> Explore and restore -> Restore to the last valid backup.
Second Step: Delete the empty Fast Dial link in your bookmarks and let Xmarks "synchronize now" and download the bookmarks from server (NOT merge)