My Inbox in Mail 6.0 populating non incoming mail

Ever since I updated to Mountain Lion, Mail (6.0) has gained a weird behaviour of populating email that should be outside of the inbox (deleted, sent) if it fits in with a "conversation". Even if I delete it, it just comes back into the conversation, but in the top right hand corner gains a label indicating (deleted) or (Sent - xxx@xxx.com).

Very anoying. And it's happening on two separate machines with both IMAP and EXCHANGE accounts.