The folder you have deleted was the old preference folder of the previous version.
To find the one of the new version you should look in the hidden Application Data folder usually located at "C:\Documents and Settings\<your computer name>\Application Data".
If you can't find it, search for it using START>Search....>For Files And Folders... using the search query " LimeWire ". You'll have to include the hidden files in your search to get it shown.
After you found it (LW should be completely closed at that time; i.e. also in the system tray), delete it and the restart LW.
If that doesn't do the trick, then you might need to reinstall your Java. I reckon doing it in the following order:
Uninstall LW and all Java versions on your system. Reboot and then download the JRE offline installer of the newest Java version from here:
http://java.sun.com/j2se/1.5.0/download.jsp
Install it and reboot again, then reinstall LW.
