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I disagree. The "All Mail" should be as it is. The reason is: When you throw stuff into your wastebin, you can still find things there after you threw it in there - all until the wastebin is purged.
There are things which could be done differently though:
* Have a (persistent?) setting to show deleted mails or not in "All Mail"
* Have a "saved search" feature which is kinda like a folder, but it performs a search when you enter this "folder".
Both of these could be used to achieve the same without expecting everyone to adhere to the same view of what "All mail" should contain.