When you delete emails within WP7 it has a different folder setup to Gmail, which is why you may see a new deleted items folder as such. I remember the days of Kerio and Thunderbird wher eit would create new folders for sent, junk and trash. As for Outlook downloading deleted mail on the Gmail account, is it putting them back in the inbox folder across all clients (including web mail) or is it literally Outlook acting on its own?