"Overwrite any changed files" option does not stay enabled on this build, Windows 7 Pro SP1 64-bit. At least on an ERO peer. Or is it by design? EDIT: Okay, it seems to be by design. Sorry for posting before testing. :>
There should be a folder called .SyncArchive inside the synced folder where the deleted files could be. You can also check the History tab to see any activity that might have occurred regarding those files.