I have added the Outlook 12 security key: Level1Remove with .lnk;.url per KB
829982 but that does not seem to allow access to shortcuts (from IE
Favorites) placed in Contact Notes. Any ideas?

One workaround is to move all Favorites to FireFox and then past from
Bookmarks, which come in as hyperlinks rather than shortcuts.

Clearly, there should be some thought out workaround such as a past-special
option when copying shortcuts that allows you to paste the hyperlink.