Is the recycle.bin virus dangerous?

Yes, executables in the recycling bin can be executed. The $RECYCLE.BIN virus has a special purpose in Windows Explorer so items inside of it cannot be interacted with. This does not prevent the executables from being listed as a service, startup entry, or used from command line. Around 2007 I found a worm hiding in the $RECYCLE.BIN of a customer. When you plugged in a USB drive, the worm would overwrite the AUTORUN.INF file with an entry that looked like the "Open folder to view files". When you plug the USB drive in a new computer and click the wrong "Open folder to view files" entry, it would drop the malware in your $RECYCLE.BIN and create a startup entry in the registry.

It was especially hard to manually clean up because the $RECYCLE.BIN is hard to access from windows. From the command line, I had to run dir /ah and dir /as just to navigate into it and see the malware.

  Finally, $RECYCLE.BIN has SID "folders'' for each user's recycling bin. This means you can put an SID that doesn't exist and nobody would ever see the files normally. It's possible temp-file cleaning tools might try to delete it, but the malware I've seen had permissions broken so that wouldn't always work. Fortunately nowadays, Antivirus—in my experience—checks $RECYCLE.BIN.