WMP is purely a reference player. The files remain in the LW downld folder unless you moved them to your Music folder before adding to WMP.

Right-click shared files or folders to stop sharing (or go to LW's menu bar, Tools>Options>Sharing & press the Remove button.) When you use the Delete function in LW's Library window, it deletes the file/folder. And yes, it by-passes the Recycle bin. That's why when you use it, a popup window shows ... Are you sure you wish to delete the selected file(s)?

To recover the files you'll need a file recovery utility such as Norton Utilities or some free ones here (you could try both): 1. PC Inspector File Recovery (click on link), & also 2. Restoration (click on link)