Actually I think it is working the way I want it to now. I do not know what changed but Im good with it.
I would move or delete a file and then a new .bts file would show up of the same file I just removed. but as I said I do not know what changed but its doing what I want.
One follow up question though. If I am syncing a directory with files inside of it, and the sync has completed. If I move the files out of the directory and leave an empty directory, should btsync resync the files to the directory or do nothing? I would think it would remove the files from the source leaving only an empty directory?