How can I edit or remove people from the favourite contacts widget on my HTC Legend?

You can access them through the group "Starred in Android" in GMail

To change whether a contact is a favorite or not, go to your contact list, click on the contact name, then toggle the "star" in the top right corner of the contact screen.

For editing, this question should help, although it's specific to the HTC incredible. For removing, it's the same idea (select contact name, not icon) then remove them from the Favorites Group. Hope it helps.