No, that is still the latest version. But I'm unable to reproduce this problem, at least under 5.0.998 with WinXP and Linux.
There was an A-Shell bug fix in 4.9.969.2 (Oct 2006) which may relate to that symptom.
Otherwise, if using A-Shell/UNIX, try activating the BASERR and FOPENS traces (either with the OPTIONS statement in the miame.ini, or with SET TRACE.) That should output an error message to the log if there really is an error in the delete operation (although from your description, it sounds like there is no real error, but instead it is incorrectly reporting that it failed.)
If that still doesn't resolve it, let's see if we can get some more details (like the privileges for the directory) that would allow me to reproduce it.