I was typing while Megiddo posted, but his ideas pretty much match mine, so, not editing below.
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I like it.
The background tint fade gets lost though at 16x16. (There is one there, right, I'm not just seeing a fade due to my vision issue oddities, right?)
Also, I like the idea of a larger U.
Maybe not as big as my attachment, but, at least somewhat larger...too much matte and frame around the original at 16x16 imo.
(this is hacked from the original image using Irfanview, I don't have any other photo editing software, as like Megiddo, I don't have much graphic artistry in my body)
EDIT - Attachment #2 - Same image as favicon_2, but with Megiddo's higher contrast (WHITE) U.