Comment 74 for bug 885525

For those following this with hopes of a resolution, I wanted to add one thing, and give a work around.

The behavior will work as expected if when you load Thunderbird, you immediately go into the Account Settings and change this setting to "Remove it Immediately", and click "Ok". Then go back in and set it to "Move it to this folder:" and click "Ok". This seems to hold the preference and work correctly until Thunderbird is restarted. Once it's restarted, you have to do this again. Hopefully this can help the developers come up with a fix.

WORKAROUND:

If you're like me, and you preferred this functionality in Thunderbird, you can do what I did. I downloaded the Mozilla KeyConfig add-on, changed the settings for my backspace and delete keys to "Archive" the message. I then changed my Archive folder in "Account Settings -> Copies & Folders" to point to my previously used custom "Trash" folder (I had labeled mine "Trash_" to keep it separate from Gmail Trash.

This won't work if you right click an email and delete, however if you're always using the keyboard for deleting messages like me, this will hopefully give you an adequate resolution.