It is designed to display the most likely matches based on frequency and recency of visit, combining bookmarks with history.
To disable this, type about:config into the address bar, accept the disclaimer, and search for both places.frecency.bookmarkVisitBonus and places.frecency.unvisitedBookmarkBonus, double-clicking each one to set the value to 0. Restart the browser and bookmarks should be excluded from that autocomplete listing.
Hope this helps,
I have Ver 3.0.5 and cannot figure out how to tweak the dropdown history to my liking. Unlike the previous versions that work more IE, this version seems to only remember commonly viewed sites. Is there a way to change this to record the last 20 or so sites I've visited? Thanks.