If there are multiple emails in a conversation in the Inbox and I select one, it categorizes only that one and not the whole set of 500. But if there is only one email with that Subject in the inbox (and not a real "conversation") and the rest of the emails with the same Subject are in Deleted Items, I guess it sees that as me categorizing the entire conversation and categorizes the emails in both directories. Any way to have it only categorize the conversation in the current folder? Seems like that would be the default behavior but ...
I just repro'd it and will bring it to their attention. The clue is the same subject/not a real conversation part.
What type of email account? Are you using Exchange 2003/2007? The new conversation groups are broken in Exchange 2003/2007 (and unlikely to be fixed) but should work correctly (ie, not include other messages with the same subject) with every other account type.