I tried all the plugins on the wordpress site and non of them worked . The all in one favicon plugin even gave a site wide error making my site inaccessible till i went to the cpanel and deleted the plugin (it even disabled the wp admin dashboard)
ok the easiest way to add a favicon to your wpmu site which runs a buddypress default theme is
1) Open your cpanel
2) goto the folder where you installed your wmpu then goto your buddy press them folder wp-content/plugins/buddypress/bp-themes/bp-default/ upload your favicon.ico here . Then edit the header.php file there
wp-content/plugins/buddypress/bp-themes/bp-default/header.php
add the line
you will see the code here
http://www.rlmseo.com/blog/add-favicon-to-wordpress-blog/
just before the /head section
save and you are done!!!