JS for what is normally an image seems pretty far out there, wouldn't surprise me if not many browsers supported yet. And JS itself often needs to be tested and tweaked on many browsers before it works on all.

Personally, I would have just implemented in PHP. I already have a pretty trivial PHP script I use to overlay a site logo on images that are direct linked instead of accessed on one of my image serving sites. Although browsers might cache the favicon excessively even with the proper caching headers, would have to test. But as far as browsers would be concerned it would just be another image (even if it is generated dynamically by PHP and image magick the first time and only copied to output from a file cache after).

It is tested in Chrome, Firefox and Opera. Should work in IE9 but not tested yet.

Which browsers do you want? :p