Hi Stief,
well, I tried to do what you said, and to delete the prefs (I seem to remember though, that I'd done that allready for LW)... and full of hopes restarted LW.
but as soon as it restarted, that folder reappeared on my disc (and by the way the progress of the downloaded files still showed 0% on the client).
In deleting the prefs, I could find only one such folder, in my library, and nothing at the HD lib.
Also, you're mentionning the incomplete folder under saving, but I did really investigate every corner of those prefs... they ask there, where to save files (I guess that is complete files and I choosed a location called "complete folder"). And as for the only mention of uncomplete files, it is, on that same window : the choice to delete automatically the downloaded files, and in how many days... Nothing about selecting the location of it.
So, I'm about at the same point, and wondering where the hell can be that recorded old memory or old pref folder !