Mail Shows New email when no new email exists

First bear in mind that the message could be in any mailbox, especially if you have mail rules set to filter your mail.

If you've already verified that, it probably got lost somewhere. I've seen this happen before. You can try the Rebuild option in the Mailbox menu (select a mailbox, then Rebuild) to have Mail recalculate the message status. It'll either find the new message, or reset the message count to 0, depending on what it finds.

I posted a similar issue yesterday at http://discussions.apple.com/thread.jspa?threadID=1600639&tstart=30

Did you recently activate MobileMe? That seemed to be the trigger for my issue.

As I mentioned on the other thread, my problem turned out to be an unread message buried in a nested mail folder. Clearing that cleared the badge problem. Curiously, the mailbox which contained the unread message wasn't itself flagged as having unread messages (which is normally the case) which is probably why i didn't notice this in the first place. I suspect something having to do with MobileMe activation may have cleared the mailbox indicator but not the message indicator, leading to the "extra" message in the icon badge.

A simple way to avoid this sort of problem is to create a Smart Mailbox which contains all messages which are marked unread. That way they'll be located no mater how deeply nested they are in mail folders.