NiXC's I.T. Take-Away

When you have been delegated the right to delete items from someone else's mailbox the default functionality is to have the deleted items go into your mailbox's deleted items folder instead of the owners mailbox.
This functionality can be changed with a registry key, see here: http://office.microsoft.com/en-us/outlook/HA100750921033.aspx

HOWEVER, there is a group policy introduced with Office 2007 that can alter this functionality for all users. It's located here:
"User Configuration\Policies\Administrative Templates\Microsoft Office Outlook 2007\Tools | Options...\Delegates"
The policy is called:
"Store deleted items in the owner's mailbox instead of delegate's mailbox"

The help text says it needs to be enabled to set the functionality to have deleted items remain in the owner mailbox.
Guess what, it's WRONG! Yes Microsoft have not tested it properly. It turns out if you enable the policy you enforce the default, to have deleted items go into the delegates mailbox, not the owner's mailbox.
To get this policy to work properly you must set it to DISABLED.

When disabled, a policy key is created that enforces the alternate functionality for deleting mail.
HKLM\Software\Policies\Microsoft\Office\12.0\Outlook\Options\General
DelegateWastebasketStyle = 4

Hope this helps someone else!