I created a simple Retention Policy Tag to apply to Deleted Items folder, which should "Delete and Allow Recovery" anything that's older than 21 days. I created new Retention Policy and added the Policy Tag I just created. I applied this policy to my mailbox to see how it works, before I roll it out for other users. I ran Start-ManagedFolderAssistance on my mailbox to speed it up.
When I open my Outlook 2010, and look at items inside my Deleted Items folder, I still see all the items that were there going back to early 2010. I know the Retention Policy is being applied to all items, since on any email inside the Deleted Items, I can see "Retention Policy: Deleted Items removed after 21 days (3 weeks) Expires 11/4/2010 (for an email that was moved there on 10/14/2010). So, the policy is applied, but all the "expired" items are still sitting inside the Deleted Items folder. I click on old emails, and I can see "i" blue circle in the top left and line "This item is expired", but when it's actually going to be deleted?