If I select all on pictures to delete, will I also delete the pictures marked as favorites?
YES! it will also delete the pictures, you marked as favourites.
Some snapshots are so great you just can't get enough of them. That's what favourites are for: choose some (it takes just a couple of presses),and they'll show up in their own area of the Pictures Hub. You can set your favourites to display on the animated Pictures Tile on Start or pin them there for easy access.
Source: Windows phone Pictures