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ITunes under Vista won't delete my songs

Update:10-11Source: network consolidation
Hey guys.
I've recently updated to Windows Vista, and I'm running iTunes 7.3 with an iPod Nano.
Previously on my XP machine (with some ancient iTunes, 7.1 maybe?) I was able to select a track in my library, and either hit the Delete key or right-click and select the Delete option. This would spawn a dialogue - do I want to keep the files, or move to recycle bin (or cancel)?
Now under iTunes, when I delete a file, that dialogue is not there anymore, and deleting a file only removes it from the library view, rather than from my hard drive.
As an added piece of information, I was able to upgrade a purchased song to iTunes Plus. When you do this, there's a dialogue of similar nature offering to move the old file to the recycle bin or to keep it. This dialogue appears, but when selecting recycle it does no such thing
It's worth noting that all my music is in my iTunes Music folder, not anywhere else. I understand there can be a problem where if your music is not stored with iTunes, it won't delete the files. I don't believe this applies to my situation.
I only really noticed this by happenstance, and now I have my music collection full of tracks I don't want anymore, but no effective way of getting them back in. Why is this?
Well, that's peculiar thing #2. Previously I used to be able to just re-add my iTunes music folder, and iTunes would helpfully trawl through and add music in, ignoring tracks that already exist. It no longer does this - you can add the folder, but it creates a duplicate for each song that already exists. These duplicates are unrated with no previous play information - it's as if iTunes doesn't agree that they're the same track.
I'm wondering if these problems are related - if iTunes in some way is able to play my previous library just fine, manage ratings and so on, but is in some way confused about whether they're actually in the iTunes folder. XP and Vista have different file paths (C:\Documents and Settings\ in XP, C:\Users\ in Vista)... would this have something to do with it? I suspect that there's a Junction (like a hard link, but in Windows) in place to redirect C:\Documents and Settings\ to C:\Users\, but this behaviour is not unversally supported cleanly.
Is there a way of editing my library details to include the correct pathname if that's the problem?
Man, sorry about the long post But it's really bugging me, and obviously I don't want to have to re-add and re-rate 22 days of music...

The Best Answer

Ok I think I fixed it describes that you can gank the binary file, and re-import using the XML document.
The trick is of course to:
1. Close iTunes
2. Gank the binary file
3. Search and replace the music locations in the XML
4. Start iTunes
5. Import the XML file
This works, but there are some caveats (need to resynch the iPod, etc.). But yay, my files are once again being deleted.