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Keep in mind there are two locations that an installation updates:
Yes, I did install to a clean directory. I have even deleted all contents of the directory and re downloaded the software again to the same directory but this did not work either it still remembered the original settings.
1. The SQL Developer installation directory (which you deleted).
2. The User-Related Information (in your "user home" directory), which is updated by the settings migration
Perhaps Jim meant you should also remove the user settings for the last SQL Developer version installed and possibly even avoid migrating the old 1.5.x settings when you first start SQL Developer after that. See the following forum thread, probably unrelated to your situation, but containing where to find the location of user-related information in the Help:
Re: IDE issue - Query Result grid is not selectable or scrollable
Hope this helps,
SQL Developer Team