>Sergey, with SET DELETED ON, I created a cursor and set the buffering to 5. I inserted two records into the cursor, then deleted one. With SET DELETED ON, is performed a SELECT * on that cursor, and the result set included both the deleted and non-deleted record.

It has nothing to do with SET DELETED. In VFP8 and earlier the SQL SELECT doesn't look at buffered data. In VFP9 it can be controlled by WITH BUFFERING clause.