No, that setting in Exchange is for how long items that have been permanently are left on the system where you could restore them from using the "Restore From Deleted Items" option in the OWA (if you're using VMO) or Outlook Interface if you are using a full unified messaging solution. I just went through this myself.
Here's how I have my system setup now:
Unity is set to copy deleted messages to the Deleted Items folder.
Exchange is setup to keep deleted items for 1 days.
Message Store Manager is set to Flush Messages that arrived more than 7 days ago.
What does that all mean in the end? When a user deletes a VM message it goes to the deleted items. Those messages will be kept there for 7 days. After 7 days they removed by the Message Store Manager from the Deleted Items folder, but can be recovered on the 8th day by going into the Deleted Items folder through Outlook or OWA and using the "Recover Deleted Items" option. After the 8th day, Exchange flushes the messages away forever!
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