Making a favorites list requires Dragon King 0.8 or above.   As long as you have that, making a favorites list couldn't be simplier.
Open up your dirs.ini and make a new path entry for where you want your favorites list to be.
You can change the caption and png image to whatever you want, but the rest of the entry must be EXACTLY the same.   So in otherwords, you can't mix and match strings like you normally can.   Also you can only have one favorites list.
At this point you are probably wondering how to edit your favorites list.   Well it's quite easy.   The first thing you need to do is rescan for roms inside DK.   You only have to do this once, after you added the entry in the dirs.ini, after that, all favorites altering will be done on the fly.   After that runs you will get a very blank favorites list.   When you find a game you've played and wish to add it to your favorites simply highlight the game in DK and press the favorites tagger key.   To remove a game from your favs, simply highlight it in your favorites list and press the tagger key.
That's pretty much it, so enjoy!