Limit on Deleted Items folder?

One option would be to enable the setting to empty the Deleted Items Folder at log-off. However, a smart user could reset this.
I would go ahead and set mailbox size limits. After a users are unable to use their email a few times because they have exceeded their limit, maybe they will wise up and empty their Deleted Items folder on a regular basis (or voluntarily set Outlook to automatically empty the folder).

You cannot limit the size of individual folders within a mailbox, nor is there a way for Exchange automatically empty these folders.

Hope this helps.

You could use Mailbox Manager to manage the deleted items folder. Here's a TechRepublic article on its use.

MAILBOX MANAGER HELPS KEEP IS SIZE DOWN

Beginning with Exchange 5.5 SP3, Microsoft included Mailbox Manager, an add-in product that helps organizations keep their mailbox sizes down.

Once installed, Mailbox Manager policies can be set up to delete or audit messages. These policies are flexible. For example, users can select messages for deletion based on age and size limits. Policies can also exclude specific users or folders from cleanup, and users can even specify where the messages should go after deletion.

Since many users never clean up their Sent or Deleted Items folders, you can use Mailbox Manager to automaticallydo this without necessitating a visit to each individual desktop. In many organizations, this practice will recover a significant amount of disk space even if you use Mailbox Manager for nothing else. Some companies may choose to set up still broader policies; for example, one that ensures that no mail over six months old in any folder is retained.

The Mailbox Manager setup files are located on the Exchange Service PackCD at Eng\Server\Support\Mbmngr\I386.