The deletion of the preference folder is meant to exclude its possible corruption as one of the causes.
However, when reading your first post and what you've written now, I understand your problem slightly different.
What you're sayin' is that the song you've previously downloaded show up as "red" files when you look at them via LW>Library>Shared (or where ever you put the downloaded files?!!
Did you go to this folder and open those files directly from that folder (rather than using the LW player)??
If so and they are still there in full size, then move them all to a different folder and add this folder via LW to the shared folders.
