This is pretty much how it is working for me also. Evidently me.com mail has no way of filtering out of the inbox email that has been marked for deletion but not purged yet. I can't believe Apple didn't catch this bug in their testing (that is, if they did any testing). The interesting thing is, if you delete one of the already deleted messages in the inbox, it will go ahead and remove all deleted messages.
For right now, I'm just not even messing with me.com. I'm just using my iPhone and Outlook Express to access email on my PC.