That's the case. Here are the steps. I upload mysong.mp3 to the empeg, in the directory (playlist) \sorted_by_artist\artist\album\mysong.mp3.
Sync.
Play the song in my car.
Then go back to the PC and delete the \artist\ folder (with all the songs inside it. Supposedly).
Sync, and here are the songs back to Unattached Items Folder.
Delete mysong.mp3 from the unattached items folder.
Sync.
Song gone.

mysong.mp3 was not part of any other playlist.

Notice, this does not happen if I delete a single song, but only when I delete an entire folder. And when it happens, it does to ALL the songs in the folder.

1.03? R U referring to the beta? Anyway, I still use the 1.02 version. I'll test this again on the final 1.03, when it is avalable.

Taym
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empeg mk II blue 12Gb 090000923