Is it giving any type of error? i assume that this is part of the maintainenance plan. Try running the statement in query analyzer. See what it says. Also what permisions does the sql agent account have? perhaps it does not have the permissions to delete it?
Are you backing up to tape or disk? If the tape's not full, it won't overwrite old data no matter what it's set for. It might be the same issue if you are backing up to disk.
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