We want to remove a few values that currently exist under a multi-select drop-down field. However, we get the message that the value we are trying to delete may be being used on work items that exist either in the recycle bin or that are associated to a project that is now closed. I cleared out the recycle bin, so that leaves closed projects. The only way I see to make this work is to re-open all of the projects (and there are MANY), look for the values, update the field, re-close the projects and then I can remove the value in the drop-down list.
This issue was seen for a Project Adminstrator that didn't have access to all projects. A Subscription Adminstrator will be able to delete these values.