Someone elsewhere has kindly found the answer to the problem I have with things bypassing the recycle bin TG! Apparently someone picked it up in 2009 and it was exactly the same issue as I am having now. I can only assume they did a patch for it then because trying everything else didn't solve it. Perhaps they solved it at source but just recently the problem has returned and that's when I noticed it. I don't know what to do except contact MS and bring their attention to it. If you scroll well down the page of the link here which hopefully works, you will see a screen shot of exactly what I have been talking about, yet it doesn't happen when deleting things from the favorites bar as they ascertained too.
http://social.technet.microsoft.com/Forums/en-US/w7itprogeneral/thread/4ecddf9c-e510-4e68-92bc-015497722e51/
For those running Internet Explorer on Win 7 and your deleted items from the favorites bypass the recycle bin although you have options set not to, then look to see if you have the shield against the delete and rename items on the drop down list. Thanks for all your help here I appreciate it.