ITunes library grows when I re-import a song in lower definition

Here is the problem: my library is becoming too big to fit in my mobile devices. I had many CD's that I had initially imported in lossless definition. To save space, I decided to re-import the same CD's in lower definition (320kpbs). When prompted by iTunes, I chose "replace existing". I expected my iTune library to reduce in size, however, it is growing! Am I doing something wrong? What's the proper way to replace these songs so that the library size actually goes down?

Thanks for the suggestion.
I assume by "wastebasket" you mean "recycle bin", right?
I tried emptying my recycle bin, and no change.
Looking at the folder where the tracks are stored, Windows only shows me one entry for each track and that corresponds to the newly imported one (320kpbs). Now, I have seen cases where Windows does not show me files that are indeed there. So, this does not mean much...

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