I still don't see the issue. So the application then asks the personal domain for a favicon, how is that an issue? Especially when you consider that this feature is off by default and has a red warning label next to it, that this comes at a privacy risk.

That's actually a really good point I hadn't considered, from the documentation it mentions only suppoorting standard formats and not those such as MS exchange etc. But you're right, there are personalized which are standard.