I can't remember how to do this. (probably posted somewhere here)..but...

I made a mistake and added my large audio libary (which contains 10K+ sound samples) as a watch folder and now VMC takes 1min per page to load.  I deleted the watch folder but it still retains the patch.

how do I reset it so the system totally forgets it?

This is a method I found to work when I was trying to get rid of the annoying Sample Pictures, Sample Videos etc folders, same method will work for you to clear you library and start again:

1)  With 360 turned off, open Windows Media Player and delete all videos/music from the respective libraries (library only obviosuly, not PC)  In Tools -> Options -> Library, stop watching any folders you don't want re-added.

2)  Use Vista's built in search facility to search for the name "sample" on C:\ including non-indexed locations, delete all folders found - goodbye annoying sample folders!

3)  Browse to C:\Users\Mcx1\AppData\Local\Microsoft\Media Player and delete all .wmdb files (replace mcx1 with mcx2 ,3 etc depending on which 360 you are clearing)

4)  Fire up 360 again to find nice clean empty libraries.