I don't know if that would have helped. I know how to use mod folders too thanks. Fact is addons shouldn't be appearing ingame if they are not in the addons folder (or mod folder).
Thanks, this seems to work.

However when I go into Multiplayer, about half the servers are missing. Maybe an unrelated issue.
---------- Post added at 03:02 PM ---------- Previous post was at 02:25 PM ----------
I think I found out what was causing the original problem.
I done a search for "Skye.pbo" which is the island im working on. I seen a copy of it located in "C:\Users\Craig\AppData\Local\
VirtualStore\Program Files\Bohemia Interactive\Arma2\Skye.pbo" so I just deleted it and my problem is gone. It would seem it had saved a "virtual" copy of it that I didn't know existed and Arma2 is able to access that directory.