When you remove a file, your options are Cancel, Wastebasket, and Remove. Wastebasket should be called Trash, simply becasue that's what it's called at the root level. Or perhaps the other way around? I happen to like Trash myself...
Additional information: Hope I'm not getting anyone's nerves w/ all these bug reports...
You are confusing wastebasket with trash. In xffm they are not synonymous. The wastebasket is where the file will be put. The trash is a wastebasket collection scheme. If you have the "disable auto trash collection" option checked on, files which you sent to wastebasket will not be put in the trash. You must use the collect trash feature to do this. See the xffm section under xfce4 docs at xfce website for an explanation as to why it works this way.