C:\Recycled is a hidden folder.
Go to view/folder options, and make sure 'show all files' is checked.
I'm sure it's there, or you wouldn't probably be able to send files there.
Are you running TweakUI, and is RecycLe Bin unchecked on the Desktop tab?
If that's not the case, first try this:
Copy the bold to Notepad:
REGEDIT4
HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\explorer
\Desktop\NameSpace\{645FF040-5081-101B-9F08-00AA002F954E}
@="Recycle Bin"
Save as REcycled.reg, and doubleclick.
Choose 'yes'to import it into the Registry.
Now go to your desktop, rightclick it, and choose 'Refresh'.
Tell us whether that works.
Good luck,