Ok.
Much earlier I bitched about iTunes not removing songs from the disk when they were cleared from the library. I just spent a good few minutes fucking with it, and tracked down the root of the problem. The reason why it refused to rename the files/directories and the reason it refused to clear the files from disk is because when it wants a music folder, it literaly means, music folder.
My current setup was that a drive mapped to Z:\ contained my music in it's root (eg: Z:\Band\Album.. etc) iTunes had no problem reading it, but plenty problems removing things from it, or renaming things when the tagging was changed. After spending some time experimenting, I found out that for it to do that, I have to place my music collection at least one directory away from a drive's root. (in my case: Z:\Music) as soon as I named my library location that, it sprung to life and began prompting to delete, and started to move around my music on tagging changes.
A wonderful thing for it to do, and to not document, or warn me about.
The way that it behaves when the library is at the drive root, is very discreet. In my opinion it should have at least warned you that your actions will not have ANY affect on the disc contents, and maybe even justify the statement. But to purely ignore the fact that it's skipping a routine I rely upon to mange my collection is just poor design.
Edit: Crossposted to
http://blog.mutatorr.net