Why can't I delete mail into trash can?

It could be a glitch. If you have not already tried, I would check Apple Discussions, they may have already addressed the issue. I have not yet updated as I am a jailbreaker and am waiting for the next update from them.

How do I find apple discussions?

http://discussions.apple.com/index.jspa

that should take you there. It appears that a lot of people are having mail problems with the new update, everything from not syncing to problems like yours. I would look of those.

Thanks. I did look them up, ended up phoning apple support and after 45 minutes or so: fixed!! Thanks for your help.

No Problem! I know the Mail.app is incredibly unstable on the iPhone and every time they update they try to make it more stable, thus resulting in a mass of non-working iPhones!