If you don't like the new interface - like me - you can just edit the HTML.
Make your 16x16 pic, change it to the ".ico" format and rename it "faviconbyme.ico".
Upload it to the "images" folder on your ordinary website server.
This images folder should be in /public_html/ - the usual place.
Sign into the Blogger Dashboard and choose "Template".
Put the following code (change it to your own website name) above "</head>" .
<type="text/css" /><link rel="shortcut icon" href="http://www.yourwebsite.com/images/faviconbyme.ico" type="image/x-icon" />
Save it and now you have a pretty little icon for users who want to follow your blog. Users will put your blog URL in their "Bookmarks".
<link rel="icon" type="image/vnd.microsoft.icon" href="http://www.blogger.com/favicon.ico"/>
could still be in the blog html. You can leave it or remove it. Your code will override the microsoft icon instruction.
Favicon icon Blogspot Blog template html code dashboard