Ability for the sites favicon to be set in site settings
Yes, absolutely. I think this should probably be an extension and have some more powerful tools around helping to do cool things with favicons. Otherwise, its just easy for developers to do this as part of the site build.
Can you give some expected idea/path forward to start work on this ?
Personally I'd do just a bunch of fields related to the assets plus color selectors for the background. I would not start creating .ico files from uploaded png, etc.
I never had a single file that was able to match all favicons. You always need to touch them manually with photoshop, e.g.
Its not something I've a great deal of interest in but can see as being handy for some users. I'd much rather see this as an extension for now and something possible for Preside 11 where we'll start looking more at improving CMS focused features.
If its just a case of adding a 'favicon' tab to edit site, with various favicon options for uploading images then that's fine, but still not sure this is ready for core.