My PW2 hasn't updated to version 5.4.2 yet, so I might be wrong--but I think I've read that the first time collection syncing occurs after the update all collections ever created on any Kindle are downloaded to the PW2. This only happens once. After that, if a collection is deleted on the PW2, it will stay deleted--but if the collection shares the same name as a collection on another cloud-enabled device any changes made will be sent to the PW2--that's why Barry's solution works--he has different names for the collections on each of his devices, so once he's went through and deleted the collections he doesn't want on one of his PWs they don't get transferred again.
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