Moving files using initflashfiles.txt
 

it seems that using initflashfiles.txt to place files in a different folders leaves a copy behind in the \Windows folder (ie. it only copies the file). Is there a way to move them out?

No...

Since the ROM is read-only, all files are placed in \Windows and cannot be moved or deleted from there. Initflashfiles can be used to copy files to another location but the original will always be in the \Windows folder.

It's just the way these devices were designed.

I think the provxml files can be used to remove files copied outside of \Windows. Things in \Windows seem to stay there though. It seems that you need to remove files from the Kitchen and build without them if you want to be completely rid of something.