>> When i delete email from the inbox, it goes to the deleted folder but doesn't get taken off the server.
For POP3, this is as expected (since POP3 doesn't provide access to any folders but the INBOX)
>>So then I empty the deleted folder but it still doesn't get taken off the server.
And this is quite unexpected. At this point, Aqua should run a sync and delete those messages from the server.
Do you see it syncing?
Oh, except some mail providers decided that POP3 "DELETE" is too dangerous, so they make it look (to mail apps using POP3) that messages get deleted -- but really move them to a separate folder on the server.
I *believe* that Hotmail is one of those. Please check web mail after emptying Deleted in Aqua -- to see if that is the case ("deleted" messages getting moved to a separate folder).
>> the junk that was removed from the server doesn't get removed from the phone
Long press the account -> options and folders -> account options -> enable "Remove deleted messages".
This means "Remove from AquaMail those messages that had been downloaded earlier but on subsequent sync are discovered to be missing from the server, presumably deleted by the user".
( but that was too long for the settings screen )