Deleting an item should never have moved it to Unlisted Items (or Unattached Items or whatever that folder is called on your system--- did you know you can rename it?).

If you deleted an item and it appeared there, then something else was wrong. It should have disappeared from the player when you deleted it from the last playlist. Generally, it indicates something is wrong with the database when something shows up there.

It's likely that your upgrade to 1.03 merely fixed whatever bug was allowing the file to remain.

Now, in the case of 2.0 and later, there isn't even an Unattached Items folder any more at all. Now there's a set of Soup views which show every file on the player, whether it's in a playlist or not.