I guarantee you will have people putting favicon looking like a check-mark or an arrow to make people click more.

Correct. There could be quite a bit of fun. This more than likely could work for sites not in the top spot. If you borrow the credibility of another brand you could get a boost. This click thru boost could then translate into higher rankings over time as you outperform your spot.

I have already seen seen some ascii stars in the URLs of Googles ads. There is always abuse.

I would hope they've put thought into that and might even blacklist sites that try to steal other more popular sites favicons. I guess it would catch a lot of false positives with companies making new sites on new tlds that might share favicons.